Question 1

A company's fiscal year must correspond with the calendar year.

Accepted Answer

A) True 
 B)False

Question 2

Sanborn Company has 10 employees,who earn a total of $1,800 in salaries each working day.They are paid on Monday for the five-day workweek ending on the previous Friday.Assume that year ended on December 31,which is a Wednesday,and all employees will be paid salaries for five full days on the following Monday.The adjusting entry needed on December 31 is:

Accepted Answer

A)  Debit Salaries Expense, $5,400; credit Salaries Payable, $5,400. 
B)  Debit Salaries Expense, $3,600; credit Salaries Payable, $3,600. 
C)  Debit Salaries Expense, $9,000; credit Salaries Payable, $9,000. 
D)  Debit Salaries Payable, $5,400; credit Salaries Expense, $5,400. 
E)  Debit Salaries Expense, $5,400; credit Cash, $5,400.

Question 3

The Retained earnings account has a credit balance of $37,000 before closing entries are made.Total revenues for the period are $55,200,total expenses are $39,800,and dividends are $9,000.What is the correct closing entry for the expense accounts?

Accepted Answer

A)  Debit Income Summary $39,800; credit Expense accounts $39,800. 
B)  Debit Expense accounts $37,000; credit Retained earnings $37,000. 
C)  Credit Expense accounts $39,800; debit Retained earnings $39,800. 
D)  Debit Expense accounts $39,800; credit Income Summary $39,800. 
E)  Debit Income Summary $39,800; credit Retained earnings $39,800.

Question 4

The cash basis of accounting commonly increases the comparability of financial statements from period to period.

Accepted Answer

A) True 
 B)False

Question 5

Explain how accounting adjustments affect financial statements and provide an example of an adjustment that would impact the statements if not recorded.

Accepted Answer

The answer of Explain how accounting adjustments affect financial statements...

Question 6

The following information is available for Hatter Co.
 $$\begin{array} { | l | l | l | l | } 
\hline & 2017 & 2016 & 2015 \
\hline \text { Net income } & 2,500 & 1,700 & 1,900 \
\hline \text { Net sales } & 37,000 & 35,000 & 32,000 \
\hline \text { Total assets } & 420,000 & 395,000 & 375,000 \
\hline
\end{array}$$ 
From the information provided,calculate Hatter's profit margin ratio for each of the three years.In 2016,economic conditions and a slowing economy impacted the results of operations.Comment on the results,assuming that the industry average for the profit margin ratio is 7% for each of the three years.

Accepted Answer

The answer of The following information is available for Hatter...

Question 7

The cash basis of accounting is a system in which revenues are recorded when earned and expenses are recorded when incurred.

Accepted Answer

A) True 
 B)False

Question 8

Before an adjusting entry is made to accrue employee salaries,Salaries Expense and Salaries Payable are both understated.

Accepted Answer

A) True 
 B)False

Question 9

The accrual basis of accounting:

Accepted Answer

A)  Is generally accepted for external reporting because it is more useful than cash basis for most business decisions. 
B)  Is flawed because it gives complete information about cash flows. 
C)  Recognizes revenues when received in cash. 
D)  Recognizes expenses when paid in cash. 
E)  Eliminates the need for adjusting entries at the end of each period.

Question 10

Incurred but unpaid expenses that are recorded during the adjusting process with a debit to an expense and a credit to a liability are:

Accepted Answer

A)  Intangible expenses. 
B)  Prepaid expenses. 
C)  Unearned expenses. 
D)  Net expenses. 
E)  Accrued expenses.

Question 11

It is acceptable to record cash received in advance of providing products or services to revenue accounts if an adjusting entry is made at the end of the period to bring the liability account balance to the correct unearned amount.

Accepted Answer

A) True 
 B)False

Question 12

On April 1,Santa Fe,Inc.paid Griffith Publishing Company $1,548 for 36-month subscriptions to several different magazines.Santa Fe debited the prepayment to a Prepaid Subscriptions account,and the subscriptions started immediately.What adjusting entry should be made by Santa Fe,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 13

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

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

The answer of An ________ is a listing of all...

Question 15

Sanborn Company rents space to a tenant for $2,200 per month.The tenant currently owes rent for November and December.The tenant has agreed to pay the November,December,and January rents in full on January 15 and has agreed not to fall behind again.The adjusting entry needed on December 31 is:

Accepted Answer

A)  Debit Rent Receivable, $6,600; credit Rent Earned, $6,600. 
B)  Debit Unearned Rent, $4,400; credit Rent Earned, $4,400. 
C)  Debit Unearned Rent, $2,200; credit Rent Earned, $2,200. 
D)  Debit Rent Receivable, $4,400; credit Rent Earned, $4,400. 
E)  Debit Rent Receivable, $2,200; credit Rent Earned, $2,200.

Question 16

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 17

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:

Accepted Answer

A)  Cash basis accounting. 
B)  The expense recognition (matching) principle. 
C)  The time period assumption. 
D)  Accrual basis accounting. 
E)  Revenue basis accounting.

Question 18

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees,the end-of-period adjusting entry to record the portion of those fees that has been earned is:

Accepted Answer

A)  Debit Cash and credit Legal Fees Earned. 
B)  Debit Cash and credit Unearned Legal Fees. 
C)  Debit Unearned Legal Fees and credit Legal Fees Earned. 
D)  Debit Legal Fees Earned and credit Unearned Legal Fees. 
E)  Debit Unearned Legal Fees and credit Accounts Receivable.

Question 19

Which of the following does not require an adjusting entry at year-end?

Accepted Answer

A)  Accrued interest on notes payable. 
B)  Supplies used during the period. 
C)  Cash invested by stockholders. 
D)  Accrued wages. 
E)  Expired portion of prepaid insurance.

Question 20

Classified balance sheets commonly include the following categories:
A. Current assets
B. Long-term investments
C. Plant assets
D. Intangible assets
E. Current liabilities
F. Long-term liabilities
G. Equity.
Match the typical classification of each item below with its correct balance sheet category (A through G).
-Trademarks

Accepted Answer

A) G 
B) B 
C) A 
D) C 
E) F
F)D
G)E

Exam 3: Adjusting Accounts for Financial Statements

A company's fiscal year must correspond with the calendar year.

The Retained earnings account has a credit balance of $37,000 before closing entries are made.Total revenues for the period are $55,200,total expenses are $39,800,and dividends are $9,000.What is the correct closing entry for the expense accounts?

The cash basis of accounting commonly increases the comparability of financial statements from period to period.

Explain how accounting adjustments affect financial statements and provide an example of an adjustment that would impact the statements if not recorded.

The cash basis of accounting is a system in which revenues are recorded when earned and expenses are recorded when incurred.

Before an adjusting entry is made to accrue employee salaries,Salaries Expense and Salaries Payable are both understated.

The accrual basis of accounting:

Incurred but unpaid expenses that are recorded during the adjusting process with a debit to an expense and a credit to a liability are:

It is acceptable to record cash received in advance of providing products or services to revenue accounts if an adjusting entry is made at the end of the period to bring the liability account balance to the correct unearned amount.

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

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

Sanborn Company rents space to a tenant for $2,200 per month.The tenant currently owes rent for November and December.The tenant has agreed to pay the November,December,and January rents in full on January 15 and has agreed not to fall behind again.The adjusting entry needed on December 31 is:

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 approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees,the end-of-period adjusting entry to record the portion of those fees that has been earned is:

Which of the following does not require an adjusting entry at year-end?