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Exam 4: Adjustments,financial Statements,and the Quality of Earnings

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Question 31

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Income statement accounts are temporary accounts because their balances are closed out at the end of the accounting year.

A) True
B) False

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Question 32

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On November 1,2019,Bug Busters collected $6,000 in advance for three months of service to be provided beginning on that date.Bug credited unearned service revenue for $6,000.The books are adjusted only at year-end. Prepare the adjusting entry required on December 31,2019.

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($6,000 ÷ 3)= $2,00...

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Question 33

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Income taxes incurred but not yet paid at the end of the accounting period is an example of an accrued expense.

Which of the following statements is correct?

What is the effect on the financial statements when a company fails to accrue wages expense at year-end?

On September 1,2019,Fast Track,Inc.was started with $30,000 invested by the owners as contributed capital.On September 30,2019,the accounting records contained the following amounts: Prepare a balance sheet for Fast Track,Inc.as of September 30,2019.

At the end of the accounting period,the balances in the temporary accounts are closed while the balances in the permanent accounts are carried forward to the next accounting period.

The journal entry to adjust the unearned revenue account when revenues are earned results in an increase in assets and a decrease in liabilities.

Earnings per share is calculated by dividing net income minus preferred dividends by the average number of shares of common stock outstanding.

On December 1,2019,Fleet Company paid $30,000 for three months rent and debited prepaid rent for $30,000;the payment was for rent beginning December 1,2019. Prepare Fleet's adjusting entry required on December 31,2019.

The adjusted trial balance of Tahoe Company at the end of the accounting year,December 31,2019,showed the following: A.Prepare all the required closing entries for Tahoe Company at December 31,2019. B.Calculate the 2019 ending balance in retained earnings.

Explain how adjusting entries provide for potential manipulation by managers.In addition,discuss how compensation arrangements may result in incentives for such manipulation to occur.

Lane Company is completing the accounting cycle at the end of its annual accounting period,December 31,2019.Adjusting entries have not been made during the year so three adjusting entries must be made to update the accounts.The following accounts,selected from the company's chart of accounts,are to be used for this purpose.They are coded to the left of each title for convenient reference. Indicate the appropriate account code and amount for each of the required adjusting entries at December 31,2019. Transaction Debits Credits

Rent of $4,000 collected in advance was recorded as unearned rent revenue.At the end of the accounting period,half the rent was earned.The related adjusting entry should be a credit to rent revenue for $2,000 and a debit to unearned rent revenue for $2,000.

Top Company's 2019 sales revenue was $200,000 and 2018 sales revenue was $180,000.Top's total assets as of December 31,2019 were $150,000 and total assets as of January 1,2019 were $130,000.What is Top's total asset turnover ratio?

On October 1,2019,Adams Company paid $4,800 for a two-year insurance policy with the insurance coverage beginning on that date.As of December 31,2019,which of the following account balances are correct after adjusting entries have been made?

On December 31,2019,Krug Company prepared adjusting entries that included the following items: Depreciation expense: $31,000. Accrued sales revenue: $29,000. Accrued expenses: $12,000. Used insurance: $9,000;the insurance was initially recorded as prepaid. Rent revenue earned: $7,000;the rent was initially prepaid by the tenant and credited to unearned rent revenue. - If Krug Company reported stockholders' equity of $280,000 prior to the adjusting entries,how much is Krug's stockholders' equity after the adjusting entries?

Closing the revenue and gain accounts at year-end requires that these accounts be debited.

Which of the following correctly describes the accounts reported on the post-closing trial balance?

Which of the following accounts requires a debit to close the account at year-end?