Exam 3: Adjusting Accounts and Preparing Financial Statements

A company has 20 employees who each earn $500 per week for a 5-day week that begins on Monday. December 31 of Year 1 is a Monday, and all 20 employees worked that day. a) Prepare the required adjusting journal entry to record accrued salaries on December 31, Year 1. b) Prepare the journal entry to record the payment of salaries on January 4, Year 2.

Assuming unearned revenues are originally recorded in balance sheet accounts, the adjusting entry to record earning of unearned revenue is:

Each adjusting entry can only affect a balance sheet account.

A company earned $2,000 in net income for October. Its net sales for October were $10,000. Its profit margin is:

On December 14 Bench Company received $3,700 cash for consulting services that will be performed in January. Bench records all such prepayments in a liability account. Prepare a general journal entry to record the $3,700 cash receipt.

The main purpose of adjusting entries is to:

The accrual basis of accounting recognizes expenses when cash is paid.

Costs incurred during an accounting period but unpaid and unrecorded are accrued expenses.

Describe the types of entries required in later periods that result from accruals.

Interim financial statements refer to financial reports:

Prior to recording adjusting entries, the Office Supplies account had a $359 debit balance. A physical count of the supplies showed $105 of unused supplies available. The required adjusting entry is:

Depreciation expense is an example of an accrued expense.

It is acceptable to record cash received in advance of providing products or services to revenue accounts.

All plant assets, including land, eventually wear out or decline in usefulness.

Asset and liability balances are transferred from the adjusted trial balance to the income statement.

On May 1, Giltus Advertising Company received $1,500 from Julie Bee for advertising services to be completed April 30 of the following year. The Cash receipt was recorded as unearned fees and at year-end on December 31, $1,000 of the fees had been earned. The adjusting entry on December 31 would include:

A company recorded 2 days of accrued salaries of $1,400 for its employees on January 31. On February 9, it paid its employees $7,000 for these accrued salaries and for other salaries earned through February 9. The January 31 and February 9 journal entries are:

An _______________________ is a listing of all of the accounts in the ledger with their account balances before adjustments are made.

Explain how accounting adjustments affect financial statements.

The cash basis of accounting recognizes revenues when cash payments from customers are received.