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Exam 3: Adjusting Accounts and Preparing Financial Statements

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Question 1

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A company had no office supplies available at the beginning of the year.During the year,the company purchased $250 worth of office supplies.On December 31,$75 worth of office supplies remained.How much should the company report as office supplies expense for the year?

A) $75.
B) $125.
C) $175.
D) $250.
E) $325.

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

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Question 2

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The adjusting entry to record an accrued expense is:

A) Increase an expense; increase a liability.
B) Increase an asset; increase revenue.
C) Decrease a liability; increase revenue.
D) Increase an expense; decrease an asset.
E) Increase an expense; decrease a liability.

F) A) and B)
G) None of the above

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Question 3

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Topflight Company had $1,500 of store supplies at the beginning of the current year.During this year,Topflight purchased $8,250 worth of store supplies.On December 31,$1,125 worth of store supplies remained.Calculate the amount of Topflight Company's store supplies expense for the current year.

List the three-steps of the adjusting process.

A company earned $2,000 in net income for October.Its net sales for October were $10,000.Its profit margin is:

Profit margin can also be called return on sales.

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

The balance in the prepaid insurance account before adjustment at the end of the year is $4,800,which represents the insurance premiums for four months.The premiums were paid on November 1.The adjusting entry required on December 31 is:

Which of the following statements is incorrect?

Recording expenses early overstates current-period income; recording expenses late understates current period income.

_____________ expenses are those costs that are incurred in a period but are both unpaid and unrecorded.

What are the types of adjusting entries used for accrued expenses and accrued revenues?

The following unadjusted and adjusted trial balances were taken from the current year's accounting system for High Point. In general journal form,present the six adjusting entries that explain the changes in the account balances from the unadjusted to the adjusted trial balance.

A company owes its employees $5,000 for the year ended December 31.It will pay employees on January 6 for the previous two weeks' salaries.The year-end adjusting on entry on December 31 will include a debit to Salaries Expense and a credit to Cash.

On October 15,a company received $15,000 cash as a down payment on a consulting contract.The amount was credited to Unearned Consulting Revenue.By October 31,10% of the services required by the contract were completed.The company will record consulting revenue of $1,500 from this contract for October.

Prepaid expenses,depreciation,accrued expenses,unearned revenues,and accrued revenues are all examples of:

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 $12,000 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.

Profit margin measures the relation of debt to assets.

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 remain unearned on December 31 of this year present the December 31 adjusting entry to bring the accounts up to date.

A contra account is an account linked with another account; it is added to that account to show the proper amount for the item recorded in the associated account.