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Exam 3: Adjusting the Accounts

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Question 21

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An adjusted trial balance proves the ______________ of the total debit and credit balances after all ______________ entries have been made.

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equality, ...

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Question 22

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An adjusting entry

A) affects two balance sheet accounts.
B) affects two income statement accounts.
C) affects a balance sheet account and an income statement account.
D) is always a compound entry.

E) B) and C)
F) None of the above

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Question 23

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Which of the statements below is not true?

On Friday of each week, Earle Company pays its factory personnel weekly wages amounting to $40,000 for a five-day work week. Instructions (a) Prepare the necessary adjusting entry at year end, assuming December 31 falls on Wednesday. (b) Prepare the journal entry for payment of the week's wages on the payday which is Friday, January 2 of the next year.

State whether each situation is a prepaid expense (PE), unearned revenue (UR), accrued revenue (AR) or an accrued expense (AE). 1. Unrecorded interest on savings bonds is $245. 2. Property taxes that have been incurred but that have not yet been paid or recorded amount to $300. 3. Legal fees of $1,000 were collected in advance. By year end 60 percent were still unearned. 4. Prepaid insurance had a $500 balance prior to adjustment. By year end, 40 percent was still unexpired.

The balances of the Depreciation Expense and the Accumulated Depreciation accounts should always be the same.

If unearned revenues are initially recorded in revenue accounts and have not all been earned at the end of the accounting period, then failure to make an adjusting entry will cause

An adjusting entry always involves two balance sheet accounts.

A business pays weekly salaries of $20,000 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on a Thursday is

An adjusted trial balance should be prepared before the adjusting entries are made.

Income will always be greater under the cash basis of accounting than under the accrual basis of accounting.

Rhodes National purchased software on October 1, 2010 for $10,800. The company expects to use the software for 3 years. It has no salvage value. 1. What adjusting journal entry should the company make at the end of each month if monthly financials are prepared? (annual depreciation is $3,600) 2. What balance will be reported on the December 31, 2010 balance sheet for Accumulated Depreciation?

The adjusted trial balance is prepared

The adjusted trial balance of Rocky Acre Spread Inc. on December 31, 2010 includes the following accounts: Accumulated Depreciation, $6,000; Depreciation Expense, $2,000; Note Payable $7,500; Interest Expense $150; Utilities Expense, $300; Rent Expense, $500; Service Revenue, $19,600; Salaries Expense, $4,000; Supplies, $200; Supplies Expense, $1,200; Wages Payable, $600. Prepare an income statement for the month of December.

An adjusting entry requiring a credit to Insurance Expense indicates that the initial transaction was charged to an asset account.

What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, $15,500, and unexpired amounts per analysis of policies of $4,500?

Scotsman Company prepares monthly financial statements. Below are listed some selected accounts and their balances in the September 30 trial balance before any adjustments have been made for the month of September. (Note: Debit column does not equal credit column because this is a partial listing of selected account balances) An analysis of the account balances by the company's accountant provided the following additional information: 1. A physical count of office supplies revealed $1,000 on hand on September 30. 2. A two-year life insurance policy was purchased on June 1 for $4,800. 3. Office equipment depreciated $6,000 per year. 4. The amount of rent received in advance that remains unearned at September 30 is $500. Instructions Using the above additional information, prepare the adjusting entries that should be made by Scotsman Company on September 30.

Hercules Company purchased a computer for $4,800 on December 1. It is estimated that annual depreciation on the computer will be $960. If financial statements are to be prepared on December 31, the company should make the following adjusting entry:

Indicate (a) the type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense), and (b) the accounts before adjustment (overstated or understated) for each of the following: 1. Supplies of $200 have been used. 2. Salaries of $600 are unpaid. 3. Rent received in advance totaling $300 has been earned. 4. Services provided but not recorded total $500.

Unearned revenue is classified as