Exam 2: Review of the Accounting Process

Use the following to answer questions The following information,based on the 12/31/16 Annual Report to Shareholders of Krafty Foods ($ in millions): -Based on the information presented above,prepare the 12/31/16 Balance Sheet for Krafty Foods.

-Inventory

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the correct term.

The adjusting entry required to record accrued expenses includes:

Debits increase asset accounts and decrease liability accounts.

When converting an income statement from a cash basis to an accrual basis,expenses:

When a magazine company collects cash for selling a subscription,it is an example of:

-Capital stock

Incurring an expense for advertising on account would be recorded by:

The employees of Neat Clothes work Monday through Friday.Every other Friday the company issues payroll checks totaling $32,000.The current pay period ends on Friday,July 3.Neat Clothes is now preparing quarterly financial statements for the three months ended June 30.What is the adjusting entry to record accrued salaries at the end of June?

Adjusting entries are primarily needed for:

The adjusted trial balance contains only permanent accounts.

Which of the following accounts has a normal credit balance?

When the amount of interest receivable decreases during an accounting period:

On September 15,2016,Oliver's Mortuary received a $6,000,nine-month note bearing interest at an annual rate of 10% from the estate of Jay Hendrix for services rendered.Oliver's has a December 31 year-end.What adjusting entry will the company record on December 31,2016?

Making insurance payments in advance is an example of:

Use the following to answer questions Using the chart of accounts provided,indicate by account number the account or accounts that would be debited and credited in the following transactions and indicate the type of transaction as: (1)an external transaction, (2)an internal transaction recorded as an adjusting journal entry,or (3)a closing entry.The company uses a perpetual inventory system.All prepayments are initially recorded in permanent accounts. -Paid rent for the next three months.

Molly's Auto Detailers maintains its records on the cash basis.During 2016,Molly's collected $72,000 from customers and paid $21,000 in expenses.Depreciation expense of $5,000 would have been recorded on the accrual basis.Over the course of the year,accounts receivable increased $4,000,prepaid expenses decreased $2,000,and accrued liabilities decreased $1,000.Molly's accrual basis net income was:

Owners' equity can be expressed as assets minus liabilities.

-Cost of goods sold