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Exam 3: Preparing Financial Statements

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Question 31

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

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Question 32

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Following are selected accounts and their balances for a company after the adjustments as of May 31, the end of its fiscal year. (All accounts have normal balances.) $\begin{array}{|l|r|}\hline \text { Retained earnings } & \$ 30,000 \\\hline \text { Dividends } & 6,000 \\\hline \text { Fees earned } & 20,000 \\\hline \text { Salaries expense } & 7,000 \\\hline \text { Insurance expense } & 350 \\\hline \text { Utilities expense } & 75 \\\hline \text { Supplies expense } & 500 \\\hline \text { Supplies } & 400 \\\hline \text { Salaries payable } & 300 \\\hline \text { Depreciation expense } & 425\\\hline\end{array}$ Prepare all the necessary closing entries for this company.

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Question 33

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In preparing statements from the adjusted trial balance, the balance sheet must be prepared first.

What are the types of adjusting entries used for prepaid expenses, depreciation, and unearned revenues?

IFRS tends to be more principles-based compared with GAAP, which is viewed as more rules-based. Which of the following is a true statement about a principles-based system?

Compute the missing amounts: (1) The Prepaid Insurance account had a $455 debit balance at the beginning of the current year; $650 of insurance premiums were paid during the year; and the year-end balance sheet showed $420 of prepaid insurance; consequently, the income statement for the year must have shown $______________ of insurance expense. (2) The Office Supplies account began the current year with a $235 debit balance; the income statement for the year showed $475 of office supplies expense; and the year-end balance sheet showed the current asset, office supplies, at $225; consequently, if all supplies were accounted for, $____________ of office supplies must have been purchased during the year.

Adjustments must be entered in the journal and posted to the ledger after the work sheet is prepared.

A _____________ account is an account linked with another account, having an opposite normal balance and reported as a subtraction from that other account's balance.

The current ratio:

Prior to recording adjusting entries at the end of an accounting period, some accounts may not show proper financial statement amounts even though all transactions were correctly recorded.

Current assets and current liabilities are expected to be used up or come due within one year or the company's operating cycle whichever is longer.

Presented below are the year-end balances at December 31 of Laura's Laundry Service. (All accounts have normal balances.) a. Prepare the necessary closing entries at December 31. b. Prepare a post-closing trial balance at December 31.

The following unadjusted and adjusted trial balances were taken from the current year's accounting system for High Point, Inc. In general journal form, present the six adjusting entries that explain the changes in the account balances from the unadjusted to the adjusted trial balance.

On May 1, 2014, Giltus Advertising Company received $1,500 from Julie Bee for advertising services to be completed April 30, 2015. The cash receipt was recorded as unearned fees. At December 31, 2014, $500 of the fees had been earned. The adjusting entry on December 31, 2014, should include:

Profit margin equals ___________________ divided by net sales.

The alternative method of accounting for prepayments

If a company failed to make the end-of-period adjustment to remove the amount earned from the Unearned Management Fees account, there would be:

Compute profit margin ratio given the following information. Cost of goods sold: $28,000 Net income: $21,400 Gross profit: $400,000

The cash basis of accounting is an accounting system in which revenues are reported when cash is received and expenses are reported when cash is paid.

The accounting principle that requires revenue to be reported when earned is the: