Exam 4: The Accounting Cycle: Accruals and Deferrals

The accountant for the Grassroots Company failed to make an adjusting entry to record revenue earned but not yet billed to customers.The effect of this error is:

End-of-period adjustments-effect on net income Before making any year-end adjusting entries,the revenues of Hot Jazz Studio exceeded expenses by $127,000.However,the following adjustments are necessary: (A.)Prepaid rent consumed,$1,500. (B.)Services rendered to clients but not yet billed,$20,000. (C.)Interest accrued on notes payable,$1,100. (D.)Depreciation,$4,800. (E.)Accrued wages payable,$3,900. (F.)Fees collected in advance which have now been earned,$7,100. Complete the schedule to determine the net income of Hot Jazz Studio after these adjustments have been recorded.Show the effect of each adjustment in the space provided.Compute net income after adjustments and place answer in space provided.

Which of the following statements concerning materiality is true?

The adjusting entry to record interest that has accrued on a note payable to the bank will cause an immediate:

End-of-period adjustments West Laboratory adjusts and closes its accounts at the end of each month.The trial balance at September 30,2015,before adjustments,is as follows: The following information relates to month end adjustments: (a)Office supplies on hand September 30 amounted to $500. (b)The useful life of the medical equipment was estimated to be 20 years. (c)Many patients pay in advance for major medical procedures.Fees of $6,000 were earned during the month by performing procedures on patients who had paid in advance. (d)Salaries earned by employees during the month but not yet recorded amounted to $2,300. (e)On September 1,West Laboratory had moved and paid 2 month's rent in advance. (f)Medical procedures performed during the month but not yet billed or recorded amounted to $4,600. Prepare the adjusting entries required at September 30.

Which statement is true about land?

Gordy's Corp.has seven employees.Each earns $800 per week for a five day work week ending on Friday.This month,the last day of the month falls on a Thursday.The company should make an adjusting entry:

The failure to record an adjusting entry for depreciation would cause assets to be overstated and net income to be understated.

An expenditure that benefits year one but is paid for in year two should not be recorded until year two.

Adjusting entries-effect on elements of financial statements Whoop-It-Up,Inc.prepares monthly financial statements.On March 31,the company's accountant made adjusting entries to record: (A)Depreciation for the month of March. (B)Amount owed to Whoop-It-Up,Inc.for March from the concessionaire operating a juice bar in the facility.The amount due will be remitted to Whoop-It-Up,Inc during the first week in April. (C)Cost of supplies used in March.(When purchased,the cost of supplies is debited to an asset account.) (D)Earning of a portion of annual membership fees which had been collected in advance.(When customers purchase annual memberships,an Unearned Revenue account is credited.) (E)Accrued interest for March owed on a bank loan obtained March 1.No interest expense has yet been recorded. Indicate the effect of each of these adjusting entries on the major elements of the company's financial statements-that is,on revenue,expenses,net income,assets,liabilities,and owner's equity.Organize your answer in tabular form,using the column headings shown below and the symbols + for increase,- for decrease,and NE for no effect.

Adjusting entries-effect on elements of financial statements Galaxy Entertainment prepares monthly financial statements.On July 31,the accountant made adjusting entries to record: (A.)Depreciation for the month of July. (B.)The portion of prepaid rent for outdoor stage and seating which had expired in July. (C.)Earning of ticket revenue for July which had been subscribed in advance.(When patrons purchase the Summer Jazz Series tickets in advance,the accountant credits Unearned Ticket Revenue.) (D.)Amount owed to Galaxy from the caterer who sold food and beverages during the July performances.The amount due will be paid to the company on August 8. (E.)Amount owed to the musicians which had accrued since the last pay day in July. Indicate the effect of each of these adjusting entries on the major elements of the company's financial statements-that is,on revenue,expenses,net income,assets,liabilities,and owners' equity.Organize your answer in tabular form,using the column headings shown below and the symbols + for increase,- for decrease,and NE for no effect.

No adjusting entry should consist of:

Which of the following is not considered a basic type of adjusting entry?

Gourmet Shop purchased cash registers on April 1 for $12,000.If this asset has an estimated useful life of four years,what is the book value of the cash registers on May 31?

Which of the following would not be a proper application of the concept of materiality by Millridge Corporation?

The purpose of adjusting entries is to:

The Cash account is usually affected by adjusting entries.

Omission of the adjusting entry needed to accrue an expense at the end of the period would cause liabilities to be understated.

The balance in the Retained Earnings account that appears on the adjusted trial balance is the same as the balance of the Retained Earnings account that is reported on the balance sheet.

Since the Accumulated Depreciation account has a credit balance,it is reported on the liability side of the balance sheet along with other accounts that have a credit balance.