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Exam 3: Adjusting Accounts for Financial Statements

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Question 141

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On December 31,Carmack Company received a $215 utility bill for December that it will not pay until January 15.The adjusting entry needed on December 31 to accrue this expense is:

A) Debit Utilities Expense $215; credit Accounts Payable $215.
B) Debit Accounts Payable $215; credit Utilities Expense $215.
C) Debit Prepaid Utilities $215; credit Cash $215.
D) Debit Utilities Expense $215; credit Prepaid Utilities $215.
E) Debit Prepaid Utilities $215; credit Accounts Payable $215.

F) C) and D)
G) D) and E)

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Question 142

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Under the alternative method for accounting for unearned revenue,which of the following pairs of journal entry formats is correct?

A) $\begin{array}{|l|l|}\hline{\text { Initial Entry }} & {\text { Adjusting Entry }} \\\hline \text { Cash } & \text { Unearned Consulting Revenue } \\\hline \text { Unearned Consulting Revenue } & \text { Consulting Revenue } \\\hline\end{array}$
B) $\begin{array}{|l|l|}\hline {\text { Initial Entry }} &{\text { Adjusting Entry }} \\\hline \text { Cash } & \text { Consulting Revenue } \\\hline \text { Consulting Revenue } & \text { Unearned Revenue } \\\hline\end{array}$
C) $\begin{array}{|l|l|}\hline{\text { Initial Entry }} &{\text { Adjusting Entry }} \\\hline \text { Cash } & \text { Unearned Revenue } \\\hline \text { Unearned Revenue } & \text { Cash } \\\hline\end{array}$
D) $\begin{array}{|l|l|}\hline{\text { Initial Entry }} &{\text { Adjusting Entry }} \\\hline \text { Consulting Revenue } & \text { Unearned Revenue } \\\hline \text { Cash } & \text { Consulting Revenue } \\\hline\end{array}$
E) $\begin{array}{|l|l|}\hline{\text { Initial Entry }} & {\text { Adjusting Entry }} \\\hline \text { Cash } & \text { Consulting Revenue } \\\hline \text { Unearned Revenue } & \text { Unearned Revenue } \\\hline\end{array}$

F) A) and B)
G) C) and D)

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Question 143

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Intangible assets are assets that are long-term,have physical form,and are used to produce or sell products and services.

If a company records prepayment of expenses in an asset account,the adjusting entry when all or part of the prepaid asset is used or expired would:

A company paid $9,000 for a twelve-month insurance policy on February 1.The policy coverage began on February 1.On February 28,$750 of insurance expense must be recorded.

Accounts that appear in the balance sheet are often called temporary (nominal)accounts.

Based on the unadjusted trial balance for Glow Styling and the adjusting information given below,prepare the adjusting journal entries for Glow Styling.After completing the adjusting entries,prepare the trial balance for Glow Styling. Glow Styling unadjusted trial balance for the current year follows: Additional information: a.An insurance policy examination showed $1,240 of expired insurance. b.An inventory count showed $210 of unused shop supplies still available. c.Depreciation expense on shop equipment,$350. d.Depreciation expense on the building,$2,220. e.A beautician is behind on space rental payments,and this $200 of accrued revenues was unrecorded at the time the trial balance was prepared. f.$800 of the Unearned Rent account balance was earned by year-end. g.The one employee,a receptionist,works a five-day workweek at $50 per day.The employee was paid last week but has worked four days this week for which she has not been paid. h.Three months' property taxes,totaling $450,have accrued.This additional amount of property taxes expense has not been recorded. i.One month's interest on the note payable,$600,has accrued but is unrecorded. Use the above information to prepare the adjusted trial balance for Glow Styling.

Closing the temporary accounts at the end of each accounting period does all of the following except:

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

It is acceptable to record prepayment of expenses as debits to expense accounts if an adjusting entry is made at the end of the period to bring the asset account balance to the correct unused or unexpired amount.

High Step Shoes,had annual revenues of $185,000,expenses of $103,700,and paid dividends of $18,000 during the current year.The retained earnings account before closing had a balance of $297,000.The ending retained earnings balance after closing is:

Farmers' net income was $740,000 and its net sales were $8,000,000.Calculate its profit margin ratio.

A company earned $3,000 in net income for October.Its net sales for October were $10,000.Its profit margin is:

Reversing entries are optional.

On the work sheet,net income is entered in the Income Statement Credit column as well as the Balance Sheet or Statement of Retained Earnings Credit column.

On July 1,a company paid the $2,400 premium on a one-year insurance policy with benefits beginning on that date.What will be the insurance expense on the annual income statement for the first year ended December 31?

List the steps in the accounting cycle.

A company records the fees for legal services paid in advance by its clients in an account called Unearned Legal Fees.If the company fails to make the end-of-period adjusting entry to move the portion of these fees that has been earned to a revenue account,one effect will be:

The purpose of reversing entries is to:

An adjusting entry was made on year-end December 31 to accrue salary expense of $1,200.Assuming the company does not prepare reversing entries,which of the following entries would be prepared to record the $3,000 payment of salaries in January of the following year?