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Exam 3: Adjusting Accounts and Preparing Financial Statements

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Question 81

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

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Accrued revenues in one period result in...

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Question 82

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Identify the types of adjusting entries and explain the purpose of each type.

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Adjusting entries can be grouped into tw...

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Question 83

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Complete the following by filling in the blanks: (1) The Prepaid Insurance account had a $455 debit balance at the beginning of the current year; $650 of insurance premiums were paid during the year; and the year-end balance sheet showed $420 of prepaid insurance; consequently, the income statement for the year must have shown $_______________ of insurance expense. (2) The Office Supplies account began the current year with a $235 debit balance; the income statement for the year showed $475 of office supplies expense; and the year-end balance sheet showed the current asset, office supplies, at $225; consequently, if all supplies were accounted for, $_____________ of office supplies must have been purchased during the year.

Accrued expenses at the end of one accounting period are expected to result in cash payments in a future period.

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

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:

An account linked with another account that has an opposite normal balance and that is subtracted from the balance of the related account is a(n) :

Accrued revenues at the end of one accounting period are expected to result in cash payments in a future period.

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

The time period assumption assumes that an organization's activities can be divided into specific time periods.

How is profit margin calculated? Discuss its use in analyzing a company's performance.

Revenue and expense balances are transferred from the adjusted trial balance to the income statement.

The following information is available for Hughes Co. From the information provided, calculate Hughes' profit margin ratio for each of the three years. In 2010 economic conditions and a slowing economy impacted the results of operations. Comment on the results, assuming that the industry average for the profit margin ratio is 7% for each of the three years.

An _______________________ is a listing of all of the accounts in the ledger with their account balances after adjustments are made.

The cash basis of accounting is an accounting system in which revenues are recorded when cash is received and expenses are recorded when cash is paid.

Ben had total assets of $149,501,000, net income of $6,242,000, and net sales of $209,203,000. Its profit margin was 2.98%.

A company has 20 employees who each earn $500 per week for a 5-day week that begins on Monday. December 31 of Year 1 is a Monday, and all 20 employees worked that day. a) Prepare the required adjusting journal entry to record accrued salaries on December 31, Year 1. b) Prepare the journal entry to record the payment of salaries on January 4, Year 2. Answer will vary

On June 30 of the current calendar year, Apricot Co. paid $7,500 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 for Apricot would include:

On November 1, Jay Company loaned an affiliate $100,000 at a 9.0% interest rate. The note receivable plus interest will not be collected until March 1 of the following year. The company's annual accounting period ends on December 31. The adjusting entry needed on December 31 is:

Profit margin reflects the percent of profit in each dollar of revenue.