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Exam 3: Adjusting Accounts and Preparing Financial Statements

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Question 41

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The current portion of long-term debt is classified with the _________________________.

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Question 42

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A ____________________ is useful in preparing interim statements and in showing the effects of proposed transactions.

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Question 43

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The Unadjusted Trial Balance columns of a company's work sheet show the balance in the Office Supplies account as $750. The Adjustments columns show that $425 of these supplies were used during the period. The amount shown as Office Supplies in the Balance Sheet columns of the work sheet is:

The last four steps in the accounting cycle include preparing the adjusted trial balance, preparing financial statements and recording closing and adjusting entries.

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

If the Balance Sheet columns of a work sheet fail to balance when the amount of the net income is added to the Balance Sheet Credit column, the cause could be:

On May 1, 2011, Giltus Advertising Company received $1,500 from Julie Bee for advertising services to be completed April 30, 2012. The cash receipt was recorded as unearned fees. At December 31, 2011, $500 of the fees had been earned. The adjusting entry on December 31, 2011 should include:

______________________ are required at the end of the accounting period because certain internal transactions and events remain unrecorded.

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

__________________ expenses are those costs that are incurred in a period but are both unpaid and unrecorded.

Presented below are the year-end balances at December 31 of Laura's Laundry Service. (All accounts have normal balances.) $\begin{array} { | l | r | } \hline \text { Accounts receivable } & \$ 12,000 \\\hline \text { Accounts payable } & 25,000 \\\hline \text { Accumulated depreciation - Catering equipment } & 30,000 \\\hline \text { Advertising expense } & 4,000 \\\hline \text { Cash } & 42,000 \\\hline \text { Depreciation expense - Catering equipment } & 12,000 \\\hline \text { Insurance expense } & 3,000 \\\hline \text { Catering equipment } & 125,000 \\\hline \text { Catering service revenue } & 200,000 \\\hline \text { Notes payable } & 65,000 \\\hline \text { Common stock } & 3,000 \\\hline \text { Retained earnings } & 14,000 \\\hline \text { Dividends } & 18,000 \\\hline \text { Prepaid insurance } & 1,500 \\\hline \text { Salaries payable } & 4,000 \\\hline \text { Salary expense } & 97,000 \\\hline \text { Supplies } & 1,500 \\\hline \text { Supplies expense } & 9,000 \\\hline \text { Repair expense } & 7,000 \\\hline \text { Unearned catering service revenues } & 500 \\\hline \text { Utilities expense } & 9,500 \\\hline\end{array}$ a. Prepare the necessary closing entries at December 31. b. Prepare a post-closing trial balance at December 31.

__________________________ is the process of allocating the cost of plant assets to their expected useful lives.

Adjusting entries are made after the preparation of financial statements.

What is the purpose of closing entries? Describe the closing process.

A company paid $6,000 for a six-month insurance policy. The policy coverage began on February 1. On February 28, $100 of insurance expense must be recorded.

An expense account is normally closed by debiting Income Summary and crediting the expense account.

Pfister Co. leases an office to a tenant at the rate of $5,000 per month. The tenant contacted Pfister and arranged to pay the rent for December 2011 on January 8, 2012. Pfister agrees to this arrangement. a. Prepare the journal entry that Pfister must make at December 31, 2011 to record the accrued rental revenue. b. Prepare the journal entry to record the receipt of the rent on January 8, 2012.

The matching principle and the full closure principle are the two main accounting principles used in accrual accounting.

The recurring steps performed each accounting period, starting with analyzing and recording transactions in the journal and continuing through the post-closing trial balance, are referred to as the:

On December 31, the balance in the Prepaid Insurance account was $4,500, which is the remaining balance of a twelve-month policy purchased on October 31 in the current year. How much did this policy originally cost?