FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 3: Adjusting Accounts and Preparing Financial Statements

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 101

Multiple Choice

Review LaterAdd Note

Review Later

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

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

Correct Answer

verified

Show Answer

Question 102

Multiple Choice

Review LaterAdd Note

Review Later

On May 1, Sellers Marketing Company received $1,500 from Franco Marcelli for a marketing campaign effective from May 1 this year to April 30 of the following year. The Cash receipt was recorded as unearned fees and at year-end on December 31, $1,000 of the fees had been earned. Assuming adjustments are only made at year-end, the adjusting entry on December 31 would be:

A) A debit to Fees Earned and a credit to Cash for $1,000.
B) A debit to Unearned Fees and a credit to Cash for $500.
C) A debit to Unearned Fees and a credit to Fees Earned for $1,000.
D) A debit to Fees Earned and a credit to Cash for $500.
E) A debit to Fees Earned and a credit to Unearned Fees for $500.

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

Correct Answer

verified

Show Answer

Question 103

Multiple Choice

Review LaterAdd Note

The adjusted trial balance contains information pertaining to:

On January 1, Eastern College received $1,200,000 from its students for the spring semester that it recorded in Unearned Tuition and Fees. The term spans four months beginning on January 2 and the college spreads the revenue evenly over the months of the term. Assuming the college prepares adjustments monthly, what amount of tuition revenue should the college recognize on February 28?

A company entered into a 2-month contract for $50,000 on April 1. It earned $25,000 of the contract services in April and billed the customer. The company should recognize the revenue when it receives the customer's check.

Each adjusting entry affects one or more income statement account, one or more balance sheet account, and never cash.

On January 1, a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is:

The accrual basis of accounting requires adjustments to recognize revenues in the periods they are earned and to match expenses with revenues.

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

The main purpose of adjusting entries is to:

Failure to record depreciation expense will overstate assets and understate expenses.

Which of the following statements related to U.S. GAAP and IFRS is incorrect?

Sanborn Company has 10 employees, who earn a total of $1,800 in salaries each working day. They are paid on Monday for the five-day workweek ending on the previous Friday. Assume that year ended December 31, is a Wednesday and all employees will be paid salaries for five full days on the following Monday. The adjusting entry needed on December 31 is:

Using the table below, indicate the impact of the following errors made during the adjusting entry process. Use a "+" for overstatements, a "-" for understatements, and a "0" for no effect. The first one is provided as an example. $\begin{array} { | c | l | l | l | c | c | c | } \hline &{ \text { Error } } & \text { Revenues } & \text { Expenses } & \text { Assets } & \text { Liabilities } & \text { Equity } \\\hline \text { Ex. } & \begin{array} { l } \text { Did not record depreciation } \\\text { for this period }\end{array} & 0 & - & + & 0 & + \\\hline 1 . & \begin{array} { l } \text { Did not record unpaid } \\\text { telephone bill }\end{array} & & & & & \\\hline 2 . & \begin{array} { l } \text { Did not adjust unearned } \\\text { revenue account for revenue } \\\text { earned this period. }\end{array} & & & & & \\\hline 3 . & \begin{array} { l } \text { Did not adjust shop supplies } \\\text { for supplies used this period }\end{array} & & & & & \\\hline 4 . & \begin{array} { l } \text { Did not accrue employee } \\\text { salaries for this period }\end{array} & & & & & \\\hline\end{array}$ $\begin{array} { | l | l | l | l | l | l | } \hline 5 . & \begin{array} { l } \text { Recorded rent expense owed } \\\text { with a debit to insurance } \\\text { expense and a credit to rent } \\\text { payable }\end{array} & & & & \\\hline\end{array}$

Since the revenue recognition principle requires that revenues be recorded when earned, there are no unearned revenues in accrual accounting.

Depreciation measures the decline in market value of an asset.

A broad principle that requires identifying the activities of a business with specific time periods such as months, quarters, or years is the:

________ refer to costs incurred in a period that are both unpaid and unrecorded. ________ refer to revenues earned in a period that are both unrecorded and not yet received in cash (or other assets).

On December 1, Casualty Insurance Company borrowed $50,000 at a 6.0% interest rate from One Mutual Bank. The note payable plus interest will not be paid until April 1 of the following year. The company's annual accounting period ends on December 31 and adjustments are only made at year-end. The adjusting entry needed on December 31 is:

Each adjusting entry will affect a balance sheet account.