Exam 4: The Accounting Cycle: Accruals and Deferrals

The Blue Chip Co.prepared the following income statement for December 31,2018 but neglected to make the necessary adjusting entries. Required: Prepare a corrected income statement after considering the following: (1. )The company had purchased a truck for $4,800 on January 1,2018 that was expected to last 5 years.It was originally debited to the account "Truck" and credited to cash. (2. )Salaries of $2,400 were owed to employees but not yet recorded. (3. )The company owed $640 in accrued interest that was to be paid early in January 2019. (4. )In November 2018,the company had received $3,600 of advance payments,which were originally recorded as Unearned Revenue.One-third of this was earned in December 2018.

Which of the following is the accounting principle that governs the timing of revenue recognition?

Which of the following situations does not require Empire Company to record an adjusting entry at the end of January?

Prepaid expenses are:

Employees are owed $750 for services since the last payday in March,to be paid the first week in April.The amount to be reported in the March income statement for salaries expense is:

[The following information applies to the questions displayed below.] Gamma Company adjusts its accounts at the end of each month.The following information has been assembled in order to prepare the required adjusting entries at December 31: (1)A one-year bank loan of $720,000 at an annual interest rate of 6% had been obtained on December 1. (2)The company's pays all employees up-to-date each Friday.Since December 31 fell on Tuesday,there was a liability to employees at December 31 for two day's pay.Employees earn a total of $12,800 per week. (3)On December 1,rent on the office building had been paid for three months.The monthly rent is $7,000. (4)Depreciation of office equipment is based on an estimated useful life of five years.The balance in the Office Equipment account is $12,360;no change has occurred in the account during the year. (5)All fees totaling $19,800 were earned during the month for clients who had paid in advance. -What amount of interest expense has accrued on the bank loan?

Tuna Co.purchased a building in 2018 for $650,000 and debited an asset called "Buildings" for the entire amount.The company never depreciated the building although it had a useful life of 15 years.At the end of 2018,this action will cause:

The accrual of interest on a note payable will:

End-of-period adjustments West Laboratory adjusts and closes its accounts at the end of each month.The trial balance at September 30,2018,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.

Prepaid expenses appear:

Unpaid expenses may be included as an expense on the income statement.

The concept of materiality:

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

The Cash account is usually affected by adjusting entries.

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

Adjusting Entries Identify four types of timing differences between cash flows and the recognition of expenses or revenues that may require adjusting entries.Give an example of each.

Videobusters,Inc.offered books of video rental coupons to its patrons at $40 per book.Each book contained a certain number of coupons for video rentals.During the current period 500 books were sold for $20,000,and this amount was credited to Unearned Rental Revenue.At the end of the period,it was determined that $15,000 worth of coupons had been used by customers to rent videos.The appropriate adjusting entry at the end of the period would be:

Which statement is true about land?

Which of the following is not an example of an adjusting entry?

Adjusting entries: