Exam 3: Adjusting the Accounts

The income statement for Catlett Company included the following revenues and expenses for 20x5: Listed below are the related balance sheet account balances at year end for this year and last year: a.Compute cash received for fees during the year. b.Compute cash paid for wages during the year. c.Compute cash paid for insurance during the year. d.Compute cash paid for interest during the year.

Which of the following pairs of accounts could possibly appear in the same adjusting entry?

When a credit sale takes place,

How and why is the matching rule applied to the cost of a building?

Which of the following transactions will not result in an increase in revenues?

When expenses exceed revenues,

When a direct cause-and-effect relationship cannot be established between revenues and costs,the costs are

Financial statements may be prepared from an adjusted trial balance.

An adjusting entry would not include which of the following accounts?

The matching rule is most closely related to the cash basis of accounting.

Accounting periods of greater than a year are called interim periods.

When preparing financial statements,the accountant assumes that the business will continue to operate for at least 5 years,unless there is evidence to the contrary.

Which of the following situations is not an example of a deferral?

The adjusting entry for the expiration of prepaid advertising,originally recorded as an asset,

Red Company created advertising copy for a client.Which of the following does not indicate that the transaction meets the SEC's four criteria for revenue recognition?

Use this information pertaining to Tucson Company to answer the following question. 1.The corporation's Supplies account showed a beginning debit balance of $400 and supplies purchased of $1,600.There were $600 of supplies on hand at year end. 2)Depreciation on a building being depreciated over 5 years is estimated to be $10,000 per year.The building was purchased at the beginning of the prior year for $50,000. 3)A one-year insurance policy was purchased for $4,800.Five months have passed since the purchase. 4)Accrued interest on a note receivable amounted to $200. 5)The company received a $3,600 advance payment during the year on services to be performed.By the end of the year,one-third of the services had been performed. Which of the following statements is correct regarding the building?

One application of accrual accounting is adjusting the accounts.

Accounting periods should be of equal length to facilitate comparisons between periods.

Direct cause-and-effect relationships between revenues and costs can usually be demonstrated.

Revenues