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Exam 3: Adjusting Accounts for Financial Statements

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Question 41

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The revenue recognition principle is the basis for making adjusting entries that pertain to unearned and accrued revenues.

A) True
B) False

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Question 42

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After preparing and posting the closing entries for revenues and expenses,the income summary account has a debit balance of $33,000.The entry to close the income summary account will be:

A) Debit Dividends $33,000; credit Income Summary $33,000.
B) Debit Income Summary $33,000; credit Dividends $33,000.
C) Debit Income Summary $33,000; credit Retained earnings $33,000.
D) Debit Retained earnings $33,000; credit Income Summary $33,000.
E) Credit Retained earnings $33,000; debit Dividends $33,000.

F) B) and E)
G) D) and E)

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Question 43

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Glisten Co.leases an office to a tenant at the rate of $3,000 per month.The tenant contacted Glisten and arranged to pay the rent for December on January 8 of the following year.Glisten agrees to this arrangement. a)Prepare the journal entry that Glisten must make at year ended December 31 to record the accrued rent revenue. b)Prepare the journal entry to record the receipt of the rent on January 8 of the following year (Assume no reversing entries were made).

Which of the following assets is not depreciated?

An adjusting entry often includes an entry to Cash.

A roofing company collects fees when jobs are complete.The work for one customer,whose job was bid at $3,000,has been completed as of December 31,but the customer has not yet been billed.Assuming adjustments are only made at year-end,what is the adjusting entry the company would need to make on December 31,the calendar year-end?

Classified balance sheets commonly include the following categories. a. Current assets b. Long-term investments c. Plant assets d. Intangible assets e. Current liabilities f. Long-term liabilities g. Equity. Indicate the typical classification of each item below by placing the letter of the correct balance sheet category a through g in the blank space next to the item.

Financial statements can be prepared directly from the information in the adjusted trial balance.

A company entered into a 2-month contract for $50,000 on April 1.It earned $25,000 of the contract services in April and billed the customer.The company should recognize the revenue when it receives the customer's check.

The following information is available for the Noir Detective Agency.After closing entries are posted,what will be the balance in the Retained earnings account?

At the beginning of the year,Sigma Company's balance sheet reported Total Assets of $195,000; Total Liabilities of $15,000; and Total Paid-in capital of $60,000.During the year,the company reported total revenues of $226,000 and expenses of $175,000.Also,dividends during the year totaled $48,000.Assuming no other changes to Retained earnings,the balance in the Retained earnings account at the end of the year would be:

Adjusting entries are usually entered in the work sheet before they are entered in the general journal.

The calendar year-end adjusted trial balance for Blessinger Co. follows: Required: (a) Prepare a classified year-end balance sheet. (Note: A $9,000 installment on the long-term note payable is due within one year.) (b) Prepare the required closing entries.

The expense recognition (matching)principle requires that expenses get recorded in the same accounting period as the revenues that are earned as a result of the expenses,not necessarily when cash is paid.

Match the following appropriate definition with the correct term.

On January 1,Fashion Forward Magazine received $15,000 from subscribers for the annual subscriptions that it recorded in Unearned Subscription Revenue.The issues of the magazine are mailed to subscribers quarterly.What amount of subscription revenue should the magazine recognize on March 31 when the first issue is sent in March?

Andrew's net income was $280,000; its total assets were $1,050,000; and its net sales were $3,500,000.Calculate the company's profit margin ratio.

Describe a work sheet and explain why it is useful.

Assuming unearned revenues are originally recorded in balance sheet accounts,the adjusting entry to record earning of unearned revenue is:

If a company reporting on a calendar year basis,paid $18,000 cash on January 1 for one year of rent in advance (lease beginning January 1),and adjusting entries are made at the end of each month,the balance remaining in Prepaid Rent on December 1 should be $1,500.