Question 1

On January 1,Eastern College received $1,200,000 from its students for the spring semester that it recorded in Unearned Tuition and Fees.The term spans four months beginning on January 2 and the college spreads the revenue evenly over the months of the term.Assuming the college prepares adjustments monthly,what amount of tuition revenue should the college recognize on February 28?

Accepted Answer

A) $300,000. 
B) $600,000. 
C) $800,000. 
D) $900,000. 
E) $1,200,000.

Question 2

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.Assuming the company does not prepare reversing entries,the January 31 and February 9 journal entries are:

Accepted Answer

A)   
B)   
C)   
D)   
E)

Question 3

Using the selected information given below for Luk Company,calculate the return on assets,debt ratio,and profit margin.Comment on the results of operations and the financial position of the company for the year.

Accepted Answer

The answer of Using the selected information given below for...

Question 4

Accrued expenses reflect transactions where cash is paid before a related expense is recognized.

Accepted Answer

A) True 
 B)False

Question 5

Net income for a period will be understated if accrued revenues are not recorded at the end of the accounting period.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

On April 1,Otisco,Inc.paid Garcia Publishing Company $1,548 for 36-month subscriptions to several different magazines.Otisco debited the prepayment to a Prepaid Subscriptions account,and the subscriptions started immediately.
-What adjusting entry should be made by Otisco,Inc.for the adjustment on December 31 of the first year assuming the company is using a calendar-year reporting period and no previous adjustments had been made?

Accepted Answer

A) Debit Subscription Expense $516 and credit Prepaid Subscriptions $516. 
B) Debit Prepaid Subscriptions $516 and credit Subscription Expense $516. 
C) Debit Subscription Expense $387 and credit Cash $387. 
D) Debit Unearned Subscriptions $387 and credit Subscription Expense $387. 
E) Debit Subscription Expense $387 and credit Prepaid Subscriptions $387.

Question 8

The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from)the retained earnings account is the:

Accepted Answer

A) Income Summary account. 
B) Closing account. 
C) Balance column account. 
D) Contra account. 
E) Nominal account.

Question 9

The total amount of depreciation recorded against an asset over the entire time the asset has been owned:

Accepted Answer

A) Is referred to as depreciation expense. 
B) Is referred to as accumulated depreciation. 
C) Is shown on the income statement of the final period. 
D) Is only recorded when the asset is disposed of. 
E) Is referred to as an accrued asset.

Question 10

a)Prepare a classified balance sheet for Martin Air Freight based on the adjusted trial balance shown below.
b)Prepare the required closing entries.

* $2,000 of the long-term note payable is due during the next year.

Accepted Answer

The answer of a)Prepare a classified balance sheet for Martin...

Question 11

On December 31,Carmack Company's Prepaid Insurance account had a balance before adjustment of $6,000.The insurance was purchased on July 1 of the same year for one year of insurance coverage,with coverage beginning on that date.The adjusting entry needed on December 31 is:

Accepted Answer

A) Debit Prepaid Insurance $6,000; credit Cash $6,000. 
B) Debit Insurance Expense $3,000; credit Accounts Payable $3,000. 
C) Debit Insurance Expense $3,000; credit Prepaid Insurance $3,000. 
D) Debit Cash $6,000; credit Prepaid Insurance $6,000. 
E) Debit Insurance Expense $6,000; credit Accounts Payable $6,000.

Question 12

On May 1,Sellers Marketing Company received $1,500 from Franco Marcelli for a marketing campaign effective from May 1 of the current year to 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.Assuming adjustments are only made at year-end,the adjusting entry on December 31 would be:

Accepted Answer

A) A debit to Unearned Fees and a credit to Cash for $500. 
B) A debit to Fees Earned and a credit to Unearned Fees for $500. 
C) A debit to Unearned Fees and a credit to Fees Earned for $1,000. 
D) A debit to Fees Earned and a credit to Cash for $1,000. 
E) A debit to Fees Earned and a credit to Cash for $500.

Question 13

A trial balance prepared before any adjustments have been recorded is:

Accepted Answer

A) An adjusted trial balance. 
B) Used to prepare financial statements. 
C) An unadjusted trial balance. 
D) Correct with respect to proper balance sheet and income statement amounts. 
E) Only prepared once a year.

Question 14

Profit margin reflects the percent of profit in each dollar of revenue.

Accepted Answer

A) True 
 B)False

Question 15

Under the cash basis of accounting,no adjustments are made for prepaid,unearned,and accrued items.

Accepted Answer

A) True 
 B)False

Question 16

Earned but unrecorded revenues are recorded during the adjusting process with a credit to a revenue account and a debit to an expense account.

Accepted Answer

A) True 
 B)False

Question 17

Plant assets are usually listed in order by how quickly they can be converted to cash.

Accepted Answer

A) True 
 B)False

Question 18

List the three-steps of the adjusting process.

Accepted Answer

The answer of List the three-steps of the adjusting process....

Question 19

The recurring steps performed each reporting period in preparing financial statements,starting with analyzing and recording transactions in the journal and continuing through the post-closing trial balance,is referred to as the:

Accepted Answer

A) Accounting period. 
B) Operating cycle. 
C) Accounting cycle. 
D) Closing cycle. 
E) Natural business year.

Question 20

The Income Summary account is used to close the permanent accounts at the end of an accounting period.

Accepted Answer

A) True 
 B)False

Exam 3: Adjusting Accounts for Financial Statements

Using the selected information given below for Luk Company,calculate the return on assets,debt ratio,and profit margin.Comment on the results of operations and the financial position of the company for the year.

Accrued expenses reflect transactions where cash is paid before a related expense is recognized.

Net income for a period will be understated if accrued revenues are not recorded at the end of the accounting period.

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

The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the retained earnings account is the:

The total amount of depreciation recorded against an asset over the entire time the asset has been owned:

a)Prepare a classified balance sheet for Martin Air Freight based on the adjusted trial balance shown below. b)Prepare the required closing entries. * $2,000 of the long-term note payable is due during the next year.

On December 31,Carmack Company's Prepaid Insurance account had a balance before adjustment of $6,000.The insurance was purchased on July 1 of the same year for one year of insurance coverage,with coverage beginning on that date.The adjusting entry needed on December 31 is:

A trial balance prepared before any adjustments have been recorded is:

Profit margin reflects the percent of profit in each dollar of revenue.

Under the cash basis of accounting,no adjustments are made for prepaid,unearned,and accrued items.

Earned but unrecorded revenues are recorded during the adjusting process with a credit to a revenue account and a debit to an expense account.

Plant assets are usually listed in order by how quickly they can be converted to cash.

List the three-steps of the adjusting process.

The recurring steps performed each reporting period in preparing financial statements,starting with analyzing and recording transactions in the journal and continuing through the post-closing trial balance,is referred to as the:

The Income Summary account is used to close the permanent accounts at the end of an accounting period.