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

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Question 61

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Which of the following does not correctly describe an adjusting journal entry that debits supplies expense and credits supplies?

A) The entry increases expenses and decreases assets.
B) The entry decreases net income and decreases assets.
C) The entry increases expenses and increases retained earnings.
D) The entry decreases net income and decreases stockholders' equity.

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

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Question 62

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

A) Net income is understated and assets are understated.
B) Revenue is understated and stockholders' equity is overstated.
C) Revenue is understated and assets aren't affected.
D) Net income is understated and liabilities are overstated.

E) A) and B)
F) B) and C)

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Question 63

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Adjusting entries do not involve cash and therefore do not impact the cash flow statement.

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

A calendar-year reporting company preparing its annual financial statements should use the phrase "At December 31,2019" in the heading of which of the following?

Closing the expense and loss accounts at year-end requires that these accounts be debited.

Which of the following does not correctly describe the following adjusting journal entry?

What is the purpose of adjusting entries? Give two examples of accruals and deferrals.

Which of the following is not an accrual?

Which of the following account balances would be closed at year-end by crediting the account?

On January 1,2019,the general ledger of Global Corporation included supplies of $1,000.During 2019,supplies purchased amounted to $5,000.A physical count of inventory on hand at December 31,2019 determined that the amount of supplies on hand was $1,200.How much is the supplies expense for year 2019?

Which of the following journal entries is created as the result of a deferral?

The year-end closing process transfers net income to retained earnings.

Which of the following correctly describes the effects of accruing income tax expense at year-end?

Accrued revenues are revenues that have been earned,but the customer has not yet paid for the goods or services.

The total asset turnover ratio measures sales dollars generated per dollar of assets and is a measure of efficient management of assets to generate sales.

The adjusting entry to record accrued revenues results in an increase in assets and an increase in stockholders' equity.

Center Company is completing the accounting cycle at the end of the annual accounting period,December 31,2019.Adjusting entries have not been made during the year so three adjusting entries must be made at this date to update the accounts.The following accounts,selected from Center 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.

Which of the following journal entries is created as the result of an accrual?

On July 1,2019,Bass Company paid a two-year insurance premium.On that date the following journal entry was made: The annual accounting period ends on December 31,2019. A.How much of the premium should be reported as expense on the 2019 income statement? B.What is the amount of prepaid insurance that should be reported on the balance sheet at December 31,2019? C.Prepare the adjusting entry that should be made on December 31,2019,assuming no adjusting entries have been made during the year.