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Exam 3: The Financial Reporting Process

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Question 41

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The closing process includes which of the following?

A) Closing the balance of the retained earnings account to zero.
B) Closing the balance of only the dividends account to zero.
C) Closing the balances of only revenue and expense accounts to zero.
D) Closing the balances of revenue,expense and dividend accounts to zero.

E) A) and D)
F) All of the above

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Question 42

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The adjusted trial balance for Yondel Company at December 31,2012 is presented below: Prepare the closing entries for Yondel Company for the year ended December 31,2012.

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Question 43

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When a company provides services on account,which of the following would be recorded using cash-basis accounting?

What is the difference between permanent accounts and temporary accounts and why does an accounting system have both types of accounts?

The primary difference between accrual-basis and cash-basis accounting is:

The components of retained earnings include assets,expenses,and dividends.

The adjusting entry for a prepaid expense has the effect of reducing total assets and reducing net income.

Current assets are assets that provide a benefit to a company over more than one year.

The revenue recognition principle states that:

On April 1,a $4,800 premium on a one-year insurance policy on equipment was paid and charged to Prepaid Insurance.At the end of the year,the financial statements would report:

The closing entry for expenses includes:

The following table contains financial information for Trumpeter Inc.before closing entries: $\begin{array} { | l | r | } \hline \text { Cash } & \$ 12,000 \\\hline \text { Supplies } & 4,500 \\\hline \text { Prepaid Rent } & 2,000 \\\hline \text { Salary Expense } & 4,500 \\\hline \text { Equipment } & 65,000 \\\hline \text { Service Revenue } & 30,000 \\\hline \text { Miscellaneous Expenses } & 20,000 \\\hline \text { Dividends } & 3,000 \\\hline \text { Accounts Payable } & 5,000 \\\hline \text { Common Stock } & 68,000 \\\hline \text { Retained Earnings } & 8,000 \\\hline\end{array}$ What is Trumpeter's net income?

Which of the following is a permanent account?

Which of the following is a possible adjusting journal entry?

A post-closing trial balance:

The matching principle is the principle that states:

Prepaid expenses involve payment of cash (or an obligation to pay cash)for the purchase of an asset before the expense is incurred.

Frosty Inc.has the following balances on December 31 prior to closing entries: $\begin{array} { | l | r | } \hline \text { Revenues } & \$ 35,000 \\\hline \text { Retained Earnings, Jan. 1 } & 10,000 \\\hline \text { Cash } & 7,000 \\\hline \text { Expenses } & 23,000 \\\hline \text { Accounts Payable } & 4,000 \\\hline \text { Dividends } & 1,000 \\\hline \text { Supplies } & 18,000 \\\hline\end{array}$ Based upon the balances above,what net adjustment would be made to Retained Earnings due to closing entries?

At the beginning of December,Global Corporation had $2,000 in supplies on hand.During the month,supplies purchased amounted to $3,000,but by the end of the month the supplies balance was only $800.What is the appropriate month-end adjusting entry?

The following data are taken from the cash-basis accounting records of Myerson Company for the year ended December 31,2012: Calculate the amount of revenues and expenses for 2012 under cash-basis accounting. Selected Data as of December 31,2012 $\begin{array}{lr}\text { Customers billed in } 2012 \text { for services provided } & \$ 400,000 \\\text { Cash collections in } 2012 \text { for accounts billed in } 2011 & 20,000 \\\text { Cash collections in } 2012 \text { for accounts billed in } 2012 & 300,000 \\\text { Cash paid for supplies purchased in } 2012 & 12,000 \\\text { Supplies remaining at the end of } 2012 & 2,000 \\\text { Cash paid for salaries in } 2012 & 10,000 \\\text { Cash paid for annual rent on March } 1,2012 & 18,000\end{array}$