Exam 4: Adjustments,Financial Statements,and the Quality of Earnings

What are the purposes of closing entries? Describe permanent and temporary accounts.

What is the effect on the financial statements when a company fails to record depreciation expense at year-end?

Income taxes incurred but not yet paid at the end of the accounting period is an example of an accrued expense.

Assume Idaho Company recorded the following adjusting journal entry at year-end: Insurance expense $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\$ 2000$ $\quad$ Insurance expense $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\$ 2000$ If the beginning balance in prepaid insurance was $500 and $2,500 was paid for an insurance premium during the year,what is the ending balance in the prepaid insurance account after the above adjusting entry?

What is the effect on the financial statements when a company fails to adjust the unearned revenue account for revenues earned at year-end?

On September 1,2011,Fast Track,Inc.was started with $30,000 invested by the owners as contributed capital.On September 30,2011,the accounting records contained the following amounts: Accounts payable \ 2,200 Dividends declared and \ 2,300 paid Accounts receivable 2,200 Office equipment 25,000 Accumulated depreciation 500 Office supplies inventory 1,750 Cash 10,000 Office supplies expense 600 Consulting fees revenue 19,200 Rent expense 2,400 Contributed capital 30,000 Salary expense 6,900 Depreciation expense 500 Telephone expense 250 Prepare a balance sheet for Fast Track,Inc.as of September 30,2011.

At the end of the accounting period,the balances in the nominal accounts are closed while the balances in the real accounts are carried forward to the next accounting period.

A deferred expense such as prepaid insurance is created when cash is paid in advance of the expense incurrence and is reduced when the expense is actually incurred.

On October 1,2010,Adams Company paid $4,000 for a two-year insurance policy with the insurance coverage beginning on that date.As of December 31,2010,which of the following account balances are correct after adjusting entries have been made?

Which of the following transactions does not create a deferral?

For each of the following accounts you are to enter one capital letter in each cell which indicates for each account its normal characteristics. USE THE LETTER CODE GIVEN TYPE OF ACCOUNT CLOSING STATUS NORMAL BALANCE FINANCIAL STATEMENT A=Assets L=Liabilities C=Closed D=Debt B=Balance Sheet R=Revenue E=Expenses N=Not Closed C=Credit I=Income Statement C=Contra SE=Stockholders' Equity SE=Statement of Stockholders` Equity N=Not Applicable N=None of the above

Below are two related transactions for Golden Corporation.The annual accounting period ends December 31.Prepare the journal entry for each of the following transactions.No adjusting entries have been made during the year. A.October 1, 2011--Golden Corporation borrowed $100,000 and signed a note providing for 8% interest.The principal and interest are due in one year (on September 30, 2012). B.December 31, 2011--end of the annual accounting period.(If no entry is required, explain why).

What is the effect on the financial statements when a company fails to accrue revenue earned at year-end?

On July 1,2011,Allen Company signed a $100,000,one-year,6 percent note payable.The principal and interest will be paid on June 30,2012.How much interest expense should be reported on the income statement for the year ended December 31,2011?

Which of the following does not correctly describe the following journal entry? Supplies Cash

Which of the following journal entries was created as the result of an accrual?

On April 1,2011,the premium on a one-year insurance policy was purchased for $3,000 cash with the insurance coverage beginning on that date.Which of the following correctly describes the effect of the December 31,2011 adjusting entry on the financial statements? (Assume that no adjusting entries have been made during the year.)

Which of the following does not correctly describe the following journal entry? Salaries expense Salaries payable

The following income statement was reported for Bauer Inc.for the first year of operations ending December 31,2010 reported (in thousands of dollars): Sales revenue \ 24,500 Expenses: Cost of Sales \ 12,100 Salaries and Wages 5,300 Rent 900 Utilities 500 Miscellaneous 600 Total Expenses 19,400 Income before taxes 5,100 Income tax expense 1,785 Net income \ 3,315 Requirements: A.Calculate net profit margin B.Calculate earnings per share if there are 200,000 shares of common stock outstanding

Closing the expense and loss accounts at year-end requires that these accounts be debited.