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Exam 3: Adjusting Accounts for Financial Statements

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Question 191

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The recurring steps performed each reporting period in preparing financial statements,starting with analyzing and recording transactions in the journal and continuing through the post-closing trial balance,is referred to as the:

A) Accounting period.
B) Operating cycle.
C) Accounting cycle.
D) Closing cycle.
E) Natural business year.

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

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Question 192

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Costs incurred during an accounting period but unpaid and unrecorded are accrued expenses.

A) True
B) False

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Question 193

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On April 1,Otisco,Inc.paid Garcia Publishing Company $1,548 for 36-month subscriptions to several different magazines.Otisco debited the prepayment to a Prepaid Subscriptions account,and the subscriptions started immediately. -What adjusting entry should be made by Otisco,Inc.for the adjustment on December 31 of the first year assuming the company is using a calendar-year reporting period and no previous adjustments had been made?

Earned but unrecorded revenues are recorded during the adjusting process with a credit to a revenue account and a debit to an expense account.

The total amount of depreciation recorded against an asset over the entire time the asset has been owned:

On May 1,Sellers Marketing Company received $1,500 from Franco Marcelli for a marketing campaign effective from May 1 of the current year to April 30 of the following year.The Cash receipt was recorded as unearned fees and at year-end on December 31,$1,000 of the fees had been earned.Assuming adjustments are only made at year-end,the adjusting entry on December 31 would be:

a)Prepare a classified balance sheet for Martin Air Freight based on the adjusted trial balance shown below. b)Prepare the required closing entries. * $2,000 of the long-term note payable is due during the next year.

On December 31,Carmack Company's Prepaid Insurance account had a balance before adjustment of $6,000.The insurance was purchased on July 1 of the same year for one year of insurance coverage,with coverage beginning on that date.The adjusting entry needed on December 31 is:

Under the cash basis of accounting,no adjustments are made for prepaid,unearned,and accrued items.

Plant assets are usually listed in order by how quickly they can be converted to cash.

Using the selected information given below for Luk Company,calculate the return on assets,debt ratio,and profit margin.Comment on the results of operations and the financial position of the company for the year.

Profit margin reflects the percent of profit in each dollar of revenue.

List the three-steps of the adjusting process.

A company recorded 2 days of accrued salaries of $1,400 for its employees on January 31.On February 9,it paid its employees $7,000 for these accrued salaries and for other salaries earned through February 9.Assuming the company does not prepare reversing entries,the January 31 and February 9 journal entries are:

The Income Summary account is used to close the permanent accounts at the end of an accounting period.

A trial balance prepared before any adjustments have been recorded is:

On January 1,Eastern College received $1,200,000 from its students for the spring semester that it recorded in Unearned Tuition and Fees.The term spans four months beginning on January 2 and the college spreads the revenue evenly over the months of the term.Assuming the college prepares adjustments monthly,what amount of tuition revenue should the college recognize on February 28?

Accrued expenses reflect transactions where cash is paid before a related expense is recognized.

Net income for a period will be understated if accrued revenues are not recorded at the end of the accounting period.

The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the retained earnings account is the: