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Exam 3: Adjusting Accounts for Financial Statements

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Question 41

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Adjusting entries are often entered in the work sheet before they are entered in the general journal.

A) True
B) False

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Question 42

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The length of time covered by a set of periodic financial statements, normally a year for most companies, is referred to as the:

A) Fiscal cycle.
B) Natural business year.
C) Accounting period.
D) Business cycle.
E) Operating cycle.

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

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Question 43

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Abdulla Co., collected 6-months' rent in advance from a tenant on October 1 of the current year. When it collected the cash, it recorded the following entry: Prepare the required adjusting entry at December 31 of the current year.

Adjusting entries are designed primarily to correct accounting errors.

After posting the entries to close all revenue and expense accounts, the Income Summary account of Cleaver Auto Services has a $4,000 debit balance. This result implies that Cleaver earned a net income of $4,000.

______________________ are required at the end of the accounting period because certain internal transactions and events remain unrecorded.

The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the retained earnings account is the:

Which of the following statements related to U.S. GAAP and IFRS is incorrect?

Assets are often classified into current assets, long-term investments, plant assets, and intangible assets.

It is obvious that an error occurred in the preparation and/or posting of closing entries if:

On April 1, Griffith Publishing Company received $1,548 from Santa Fe, Inc. for 36-month subscriptions to several different magazines. The company credited Unearned Fees for the amount received and the subscriptions started immediately. What is the adjusting entry that should be recorded by Griffith Publishing Company on December 31 of the first year?

List and explain the steps in preparing a 10-column worksheet.

Depreciation expense for a period is the portion of a plant asset's cost that is allocated to that period.

McDever Corporation bills a customer $5,100 at the end of the year for services provided. The adjusting entry McDever should make to accrue the amount collectible is:

A company's fiscal year must correspond with the calendar year.

On January 1 a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is:

The Unadjusted Trial Balance columns of a company's work sheet shows the Store Supplies account with a balance of $750. The Adjustments columns shows a credit of $425 for supplies used during the period. The amount shown as Store Supplies in the Balance Sheet columns of the work sheet is:

A company made no adjusting entry for accrued and unpaid employee salaries of $9,000 on December 31. Which of the following statements is true?

Profit margin reflects the percent of profit in each dollar of revenue.

Adjusting entries are necessary so that asset, liability, revenue, and expense account balances are correctly recorded.