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Exam 3: Adjusting Accounts for Financial Statements

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Question 81

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Match the following terms with the appropriate definition:

Premises

Responses

Matching principle

Net income divided by net sales.

Profit margin

Items paid for in advance of receiving their benefits.

Accrual basis accounting

The expense created by allocating the cost of plant and equipment to the periods in which they are used.

Cash basis accounting

Requires that revenue be recorded when earned.

Revenue recognition principle

Revenues earned in a period that are both unrecorded and not yet received in cash or other assets.

Depreciation

The accounting system that recognizes revenues when earned and expenses when incurred.

Time period assumption

The accounting system where revenues are recognized when cash is received and expenses are recorded when cash is paid.

Prepaid expenses

The principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses.

Accrued revenues

A principle that assumes that an organization's activities can be divided into specific time periods such as months, quarters or years.

Premises

Matching principle

Profit margin

Accrual basis accounting

Cash basis accounting

Revenue recognition principle

Depreciation

Time period assumption

Prepaid expenses

Accrued revenues

Responses

Net income divided by net sales.

Items paid for in advance of receiving their benefits.

The expense created by allocating the cost of plant and equipment to the periods in which they are used.

Requires that revenue be recorded when earned.

Revenues earned in a period that are both unrecorded and not yet received in cash or other assets.

The accounting system that recognizes revenues when earned and expenses when incurred.

The accounting system where revenues are recognized when cash is received and expenses are recorded when cash is paid.

The principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses.

A principle that assumes that an organization's activities can be divided into specific time periods such as months, quarters or years.

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Premises

Responses

Matching principle

Profit margin

Accrual basis accounting

Cash basis accounting

Revenue recognition principle

Depreciation

Time period assumption

Prepaid expenses

Accrued revenues

Premises

Matching principle

Profit margin

Accrual basis accounting

Cash basis accounting

Revenue recognition principle

Depreciation

Time period assumption

Prepaid expenses

Accrued revenues

Responses

Question 82

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During its first year of operations,Able Co.purchased $39,600 worth of supplies.Atthe end of the year,the balance sheet showed a balance of $1,760 in the Supplies account.Prepare the necessary adjusting entry.

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Supplies purchased ...

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Question 83

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List the steps in the accounting cycle.

The Prepaid Insurance account had an unadjusted balance of $8,000 balance on December 31,2014.An analysis of insurance policies shows that $2,000 of unexpired insurance benefits remain at December 31,2014.How would the company record the related adjusting entry at December 31,2104?

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

Profit margin is defined as:

The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:

Match the following terms with the appropriate definition:

A company had no office supplies at the beginning of the year.During the year,the company purchased $250 worth of office supplies.On December 31,$75 worth of office supplies remained.How much should the company report as office supplies expense for the year?

Based on the following information,what would be the total on the credit side of a post- closing trial balance,assuming all accounts have a normal balance?

A company had revenue of $550,000,rent expense of $100,000,utility expense of $10,000,salary expense of $125,500,depreciation expense of $39,000,advertising expense of $40,200,dividends in the amount of $183,000,and an ending balance in retained earnings of $402,300.What was the beginning retained earnings for the period?

A company shows a $600 balance in prepaid insurance in the Unadjusted Trial Balance columns of the work sheet.The Adjustments columns show expired insurance of $200.This adjusting entry results in:

All necessary numbers to prepare the income statement can be taken from the income statement columns of the work sheet,including the net income or net loss.

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

Which of the following accounts would not be on the post- closing trial balance?

The time period assumption presumes that an organization's activities can be divided into specific time periods.

On October 1 of the current year,Morton Company paid $9,600 cash for a one-year insurance policy that took effect on that day.On the date of the payment,Morton recorded the following entry: Prepare the required adjusting entry at December 31 of the current year.

One-half of the landscaping work related to $35,000 cash received in advance is performed this period.(Assume that prepaid expenses are initially recorded in asset accounts and that fees collected in advance of work are initially recorded as liabilities.) How would the company record the related adjusting entry?

The accrual basis of accounting is an accounting system in which revenues are reported as earned when cash is received.

Accumulated depreciation is shown on the balance sheet as a subtraction from the cost of an asset.