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Exam 3: Preparing Financial Statements

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Question 51

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Accrual accounting and the adjusting process rely on two principles: the ___________________ principle and the ________________________ principle.

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revenue re...

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Question 52

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The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:

A) Accrual basis accounting
B) Operating cycle accounting
C) Cash basis accounting
D) Revenue recognition accounting
E) Current basis accounting

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

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Question 53

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The last four steps in the accounting cycle include preparing the adjusted trial balance, preparing financial statements, and recording closing and adjusting entries.

If a prepaid expense account were not adjusted for the amount used, on the balance sheet assets would be _______________ and equity would be __________.

July 31, 2013, the end of the quarter is on a Wednesday. Employees get paid each Friday for the week worked. Abel Co. has five employees who earn $100 per day each. Assuming the proper adjusting journal entry was made on June 30, prepare the journal entry to record the payment of wages on August 2.

The Unadjusted Trial Balance columns of a company's work sheet show the balance in the Office Supplies account as $750. The Adjustments columns show that $425 of these supplies were used during the period. The amount shown as Office Supplies in the Balance Sheet columns of the work sheet is:

The accrual basis of accounting is a system of accounting in which the adjustments are needed to assign revenues to periods in which they are earned and to match expenses with revenues.

On January 1, Acme College received $1,200,000 in Unearned Tuition Revenue from its students for the spring semester, which spans four months beginning on January 2. What amount of tuition revenue should the college recognize on January 31?

On January 1, Able Company purchased equipment costing $135,000 with an estimated salvage value of $10,500, and an estimated useful life of five years. Using the straight-line method, what is the amount that should be recorded as depreciation on December 31?

Intangible assets are long-term resources used to produce or sell products and services; they generally lack ______________ and their benefits are highly ____________.

Discuss how accrual accounting enhances the usefulness of financial statements.

The items that follow appeared in the Income Statement columns of the work sheet prepared for Armstrong Delivery Service at current year-end. In addition, retained earnings had a credit balance of $117,000 and dividends had a debit balance of $30,000 at year-end. Prepare closing journal entries for this company.

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

On June 30, 2014, Apricot Co. paid $5,000 cash for management services to be performed over a two-year period. Apricot follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The adjusting entry on December 31, 2014, for Apricot would include:

During the current year ended December 31, clients paid fees in advance for accounting services amounting to $25,000. These fees were recorded in an account called Unearned Accounting Fees. If $3,500 of these fees are still unearned on December 31 of this year, prepare the December 31 adjusting entry .

Manning, Co. collected six-months' rent in advance from a tenant on November 1 of the current year. When cash was collected, the following entry was made: Prepare the required adjusting entry at December 31 of the current year.

Ben and Jerry's had total assets of $149,501,000, net income of $6,242,000, and net sales of $209,203,000. Profit margin was 2.98%.

Prepare a balance sheet from the adjusted trial balance of Hanson Storage.

An expense account is normally closed by debiting Income Summary and crediting the expense account.

Adjusting entries result in a better matching of revenues and expenses.