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Exam 3: Adjusting Accounts and Preparing Financial Statements

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Question 81

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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: Prepare the required adjusting entry at December 31 of the current year.

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($9,600/12 mo.= $80...

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Question 82

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On October 1,Goodwell Company rented warehouse space to a tenant for $2,500 per month.The tenant paid five months' rent in advance on that date.The collection was credited to the Unearned Rent account.The company's annual accounting period ends on December 31.The adjusting entry needed on December 31 is:

A) Debit Rent Receivable,$12,500;credit Rent Earned,$12,500.
B) Debit Rent Receivable,$7,500;credit Rent Earned,$7,500.
C) Debit Unearned Rent,$7,500;credit Rent Earned,$7,500.
D) Debit Unearned Rent,$5,000;credit Rent Earned,$5,000.
E) Debit Unearned Rent,$12,500;credit Rent Earned,$12,500.

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

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Question 83

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On January 1,Fashion Forward Magazine received $15,000 from subscribers for the annual subscriptions that it recorded in Unearned Subscription Revenue.The issues of the magazine are mailed to subscribers quarterly.What amount of tuition revenue should the magazine recognize on March 31 when the first issue is sent in March?

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.

All of the following statements regarding profit margin are true except:

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

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

Prepare adjusting entries for the year ended December 31,for each of these separate situations.Assume that prepaid expenses are initially recorded in asset accounts and that fees collected in advance are initially recorded as liabilities. a.The Prepaid Rent account has a debit balance of $8,000 before adjustment,representing a prepayment for four months' rent made on December 1 of the current year. b.One-third of the work related to $18,000 of cash received in advance was performed during this period. c.Unpaid accrued salaries at December 31 amounts to $15,000 d.Work was completed for a client on December 31 in the amount of $21,000,but was not previously billed or recorded. e.Estimated depreciation on office equipment is $27,000.

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. 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.

A company made no adjusting entry for accrued and unpaid employee wages of $28,000 on December 31.This oversight would:

An unadjusted trial balance is a list of accounts and balances prepared before adjustments are recorded.

The accounting principle that requires revenue to be recorded when earned is the:

During the current year ended December 31,clients paid fees in advance for accounting services amounting to $15,000.These fees were recorded in an account called Unearned Accounting Fees.If $3,500 of these fees remains unearned on December 31 of this year,present the December 31 adjusting entry to bring the accounts up to date.

Abdulla Co.collected 6-months' rent in advance from a tenant on October 1 of the current year.When it collected the cash,it recorded the following entry: Prepare the required adjusting entry at December 31 of the current year.

The time period assumption assumes that an organization's activities may be divided into specific reporting time periods including all of the following except:

Depreciation expense is an example of an accrued expense.

An annual reporting period consisting of any twelve consecutive months is known as:

Unearned revenue is reported in the financial statements as:

A company's Office Supplies account shows a beginning balance of $600 and an ending balance of $400.If office supplies expense for the year is $3,100,what amount of office supplies was purchased during the period?

Interim financial statements refer to financial reports: