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Exam 3: Adjusting Accounts for Financial Statements

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Question 61

Multiple Choice

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An adjusting entry could be made for all the following except

A) Prepaid expenses
B) Depreciation expense
C) Owner withdrawals
D) Unearned revenues
E) Accrued revenues

F) B) and E)
G) A) and E)

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Question 62

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Adjusting entries are designed primarily to correct errors made by bookkeepers.

A) True
B) False

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Question 63

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Prepare the December 31 adjusting entry to record $450 of earned but unpaid salaries.

The accrual basis of accounting is a system of accounting in which the adjustment process is used to assign revenues to the periods in which they are earned and to match expenses with revenues.

The chief accountant was reviewing the financial statements that you had prepared for the current year with comparative results from last year. She asked you the following questions. Why is Trucking Expense so high? Why is Supplies Expense so low? Why is Unearned Revenue so high? You then investigated the records, and as a result, determined the following: The $20,000 cost of a truck was posted to Trucking Expense. Office supplies costing $1,500 were used, and the entry to record the use debited Depreciation Expense. The company had received a large payment for an order to be delivered next year. Required: Prepare the necessary journal entries to correct any errors discovered as part of the investigation.

The equipment has a useful life of 8 years. Compute the book value of the equipment after the proper June adjustment has been made.

Incurred but unpaid expenses that are recorded during the adjusting process with a debit to an expense and a credit to a liability are called

Describe the types of entries required in later periods that result from accruals.

Attendance records showed that $2,600 of Unearned Admissions Revenue has been earned in June. Compute the balance left in the following accounts: Unearned admission revenue Admissions Revenue

If an accountant forgot to record depreciation on office equipment at the end of an accounting period, what is the effect on the statements prepared at that time?

Explain how accounting adjustments affect financial statements.

Interim financial reports are financial reports

Salaries earned by employees, but unrecorded, are an example of an accrued expense.

On October 15, Gallery Corp. received $12,500 as a down payment on a consulting contract. The amount was credited to Unearned Consulting Revenue. By October 31, 10% of the contract was completed. Gallery Corp. needs to prepare an adjusting entry for $1,250.

Which of the following is false?

Laurey's Pet Emporium purchased equipment on January 1 for $35,000. The equipment will be used for five years, after which the estimated residual value will be $2,000. Using straight-line depreciation, what is the depreciation expense for the first year of the asset's life?

Computerized accounting systems should include controls to show when and where corrections are made.

Explain the purpose of preparing adjusting entries at the end of a period.

If on January 1 of this year, a company paid $12,000 rent for one year and adjusting entries are made at the end of each month, the balance of Prepaid Rent at December 1 of this year should be $1,000.

IFRS requires the preparation of interim financial statements.