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Exam 3: Adjusting Accounts for Financial Statements

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Question 31

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All of the following are true regarding prepaid expenses except:

A) They are paid for in advance of receiving their benefits.
B) They are assets.
C) When they are used,their costs become expenses.
D) The adjusting entry for prepaid expenses increases expenses and decreases liabilities.
E) The adjusting entry for prepaid expenses increases expenses and decreases assets.

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

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Question 32

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Unearned revenue is reported in the financial statements as:

A) A revenue on the balance sheet.
B) A liability on the balance sheet.
C) An unearned revenue on the income statement.
D) An asset on the balance sheet.
E) A financing activity on the statement of cash flows.

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

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Question 33

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Depreciation measures the decline in market value of an asset.

The adjusting entry to record the salaries earned due to employees for services provided but unpaid at the end of the accounting period affects the accounts in which of the following ways?

The Unadjusted Trial Balance columns of a work sheet total $84,000.The Adjustments columns contain entries for the following: 1.Office supplies used during the period,$1,200. 2.Expiration of prepaid rent,$700. 3.Accrued salaries expense,$500. 4.Depreciation expense,$800. 5.Accrued service fees receivable,$400. The Adjusted Trial Balance columns total is:

Using the information presented below,prepare an income statement from the adjusted trial balance of Dodson Containers.

Which of the following accounts could not be classified as a current liability?

On November 1 of the current year,Salinger Company paid $9,600 cash for a one-year insurance policy that took effect on that day.On the date of the payment,Salinger recorded the following entry: Assuming Salinger only prepares adjustments at year-end, prepare the required adjusting entry at December 31 of the current year.

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

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 amount should appear in the Prepaid Subscription account for Otisco,Inc.after adjustments on December 31 of the second year assuming the company is using a calendar-year reporting period and the previous year adjustment had been made?

A company purchased a new delivery van at a cost of $45,000 on July 1.The delivery van is estimated to have a useful life of 6 years and a salvage value of $3,000.The company uses the straight-line method of depreciation.How much depreciation expense will be recorded for the van during the first year ended December 31?

How is the current ratio calculated? How is it used to evaluate a company?

For each of the following two separate situations,present both the April 30 adjusting entry and the subsequent entry during May to record the payment of the accrued expenses or receipt of the accrued revenue.Assume the company does not prepare reversing entries. a.Nicolas Company has 5 employees,who earn a total of $2,900 in salaries each working day.They are paid on Monday for the five-day workweek ending on the previous Friday.Assume that fiscal year ended April 30,is a Thursday and all employees worked each day and will be paid salaries for five full days on the following Monday. b.Services of $3,000 have been performed for Clevenger Company through April 30.The client will pay the entire amount of the contract when services are completed on May 23. c.Paid the employees' salaries on May 4. d.Received payment from Clevenger Company for services that are now completed on May 23.

The difference between the cost of an asset and the accumulated depreciation for that asset is called

Describe the two alternate methods used to account for prepaid expenses.

A company purchased new furniture at a cost of $14,000 on September 30.The furniture is estimated to have a useful life of 8 years and a salvage value of $2,000.The company uses the straight-line method of depreciation.What is the book value of the furniture on December 31 of the first year?

The following information is available for the Higgins Travel Agency.After closing entries are posted,what will be the balance in the Retained earnings account?

The accrual basis of accounting recognizes revenues when cash is received from customers,regardless of when the goods or services are provided.

Adjusting entries made at the end of an accounting period accomplish all of the following except:

Adjusting is a three-step process (1)________,(2)________,and (3)________.