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Exam 3: Adjusting Accounts for Financial Statements

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Question 61

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Journal entries recorded at the end of each accounting period to prepare the revenue, expense, and dividend accounts for the upcoming period and to update the retained earnings account for the events of the period just finished are referred to as:

A) Adjusting entries.
B) Closing entries.
C) Final entries.
D) Work sheet entries.
E) Updating entries.

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

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Question 62

Multiple Choice

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Which of the following errors would cause the Balance Sheet columns of a work sheet to be out of balance?

A) Entering an asset amount in the Income Statement Debit column.
B) Entering a liability amount in the Income Statement Credit column.
C) Entering an expense amount in the Balance Sheet Debit column.
D) Entering a revenue amount in the Balance Sheet Debit column.
E) Entering a liability amount in the Balance Sheet Credit column.

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

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Question 63

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Current liabilities include accounts receivable, unearned revenues, and salaries payable.

Holman Company owns equipment with an original cost of $95,000 and an estimated salvage value of $5,000 that is being depreciated at $15,000 per year using the straight-line depreciation method. The adjusting entry needed to record annual depreciation is:

Explain why temporary accounts are closed each period.

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

A salary owed to employees is an example of an accrued expense.

K. Canopy, the stockholder of Canopy Services, Inc., The company paid $5,700 cash in dividends to the owner (sole stockholder) . The entry to close the dividends account at the end of the year is:

A company made no adjusting entry for accrued and unpaid employee salaries of $9,000 on December 31. Which of the following statements is true?

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

Normally closing entries are first entered in the general journal and then posted to the work sheet.

An unadjusted trial balance is a list of accounts and balances prepared before adjustments are recorded.

Why are financial statements prepared in a specific order? What is the usual order in which financial statements are prepared from the adjusted trial balance?

Each adjusting entry will affect a balance sheet account.

Before an adjusting entry is made to accrue employee salaries, Salaries Expense and Salaries Payable are both understated.

A company had revenues of $75,000 and expenses of $62,000 for the accounting period. The company paid $8,000 cash in dividends to the owner (sole shareholder) . Which of the following entries could not be a closing entry?

Prior to recording adjusting entries, the Office Supplies account had a $359 debit balance. A physical count of the supplies showed $105 of unused supplies available. The required adjusting entry is:

The current ratio is used to help assess a company's ability to pay its debts in the near future.

After posting the entries to close all revenue and expense accounts, the Income Summary account of Cleaver Auto Services has a $4,000 debit balance. This result implies that Cleaver earned a net income of $4,000.

A company's employees earn a total of $10,000 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.