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Exam 4: Review of the Accounting Cycle

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Question 31

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Which of the following accounts is a temporary account?

A) Supplies
B) Interest Expense
C) Patents
D) Insurance

E) All of the above
F) B) and D)

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Question 32

Multiple Choice

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Douglas Corporation paid $6,000 for monthly rental on its warehouse.This transaction ________.

A) decreased liability
B) increased shareholders' equity
C) increased assets
D) increased expenses

E) B) and D)
F) A) and B)

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Question 33

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The normal balance of a liability account is a debit.

When a prepaid expense initially recorded as an asset is incurred,the adjusting entry includes ________.

The employees of Lucid Laboratories are paid every two weeks on Friday.Total payroll is $25,000 and covers 10 workdays.The end of the current month falls on Tuesday of the pay period.What is the adjusting journal entry to accrue payroll at the end of the month?

Each of the following accounts has a normal credit balance except ________.

New York Enterprises provides advertising services to travel agencies.The company bills annually and receives payments in advance.All advertising is earned equally each month.In January,the company received $120,000; in February,it received $144,000.The fiscal year ends on February 28. Required: 1.How much revenue should be recognized from these contracts on February 28? 2.What adjusting entry will be required on February 28?

Smith Corporation purchased $65,000 of merchandise on credit.The company uses the perpetual method of recording inventory purchases.What would be the correct journal entry to record the purchase?

Which of the following accounts would not be shown on the post-closing trial balance?

Decreases in equity that result from peripheral transactions of an entity are referred to as ________.

List the steps in preparing a worksheet.

Gains and losses result from peripheral transactions of a company.

Which of the following is an adjusting entry?

Unearned revenues may be initially recorded as liabilities or revenues.

Realistic Rentals collected $10,000 in payment of advance rent for 6 months.This an example of ________.

Financial statements are prepared using data from the unadjusted trial balance.

Mattox Corporation had a unadjusted balance of $5,400 in Supplies.The actual balance was $150.The accountant failed to make the adjusting entry.What is the effect on the current year financial statements?

Deferred expenses may be initially recorded as assets or expenses.

If a prepaid expense is recorded as an expense,and the adjusting entry is not made at the end of the period,expenses on the income statement will be overstated.

Accruals occur when a company receives or pays cash before recognizing the revenue or expense in the financial statements.