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Exam 3: Adjusting Accounts for Financial Statements

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Question 111

Multiple Choice

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Prior to recording adjusting entries, the Office Supplies account had a $359 debit balance. A physical count of the supplies showed $105 of unused supplies available. The required adjusting entry is:

A) Debit Office Supplies $105 and credit Office Supplies Expense $105.
B) Debit Office Supplies Expense $105 and credit Office Supplies $105.
C) Debit Office Supplies Expense $254 and credit Office Supplies $254.
D) Debit Office Supplies $254 and credit Office Supplies Expense $254.
E) Debit Office Supplies $105 and credit Supplies Expense $254.

F) A) and C)
G) D) and E)

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Question 112

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Adjustments are necessary to bring an asset or liability account to its proper amount and also update a related expense or revenue account.

A) True
B) False

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Question 113

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The unadjusted trial balance of Barber Housekeeping Service, Inc. is entered on the partial work sheet below. Required: Complete the work sheet using the following information: (a) Salaries earned by employees that are unpaid and unrecorded, $5,000. (b) An inventory of supplies showed $3,000 of unused supplies still on hand. (c) Depreciation on automobiles, $30,000. (d) Advertising for November and December in the amount of $8,000 remains unpaid and unrecorded.

The current ratio:

On January 1, Imlay Company purchases manufacturing equipment costing $95,000 that is expected to have a five-year life and an estimated salvage value of $5,000. Imlay uses the straight-line depreciation method to allocate costs. The adjusting entry needed on December 31 of the first year is:

Intangible assets are assets that are long-term, have physical form, and are used to produce or sell products and services.

If a company plans to continue business into the future, closing entries are not required.

Recording revenues early overstates current-period income; recording revenues late understates current period income.

Which of the following does not require an adjusting entry at year-end?

An adjusting entry often includes an entry to Cash.

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

A company purchased a building at a cost of $280,000 on January 1. The building is estimated to have a useful life of 15 years and a $40,000 salvage value. The company uses the straight-line method of depreciation. What is the amount of depreciation expense for the building for the second year?

Which of the following statements regarding reporting under GAAP and IFRS is not true?

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees that has been earned is:

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

The following information is available for Brendon Company, Inc. before closing the accounts. What will be the amount in the Income Summary account that should be closed to Retained Earnings?

Using the table below, indicate the impact of the following errors made during the adjusting entry process. Use a "+" for overstatements, a "-" for understatements, and a "0" for no effect. The first one is provided as an example.

A company pays its employees $4,000 each Friday, which amounts to $800 per day for the five-day workweek that begins on Monday. If the monthly accounting period ends on Thursday and the employees worked through Thursday, the amount of salaries earned but unpaid at the end of the accounting period is:

Based on the unadjusted trial balance for Highlight Styling, Inc. and the adjusting information given below, prepare the adjusting journal entries for Highlight Styling Inc. Highlight Styling Inc.'s unadjusted trial balance for the current year follows: Additional information: a. An insurance policy examination showed $1,040 of expired insurance. b. An inventory count showed $210 of unused shop supplies still available. c. Depreciation expense on shop equipment, $350. d. Depreciation expense on the building, $2,020. e. A beautician is behind on space rental payments, and this $200 of accrued revenues was unrecorded at the time the trial balance was prepared. f. $800 of the Unearned Rent account balance was still unearned by year-end. g. The one employee, a receptionist, works a five-day workweek at $50 per day. The employee was paid last week but has worked four days this week for which she has not been paid. h. Three months' property taxes, totaling $450, have accrued. This additional amount of property taxes expense has not been recorded. i. One month's interest on the note payable, $600, has accrued but is unrecorded.

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is: