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Exam 3: Adjusting Accounts for Financial Statements

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Question 151

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Chase Company has 10 employees,who earn a total of $1,800 in salaries each working day.They are paid on Monday for the five-day workweek ending on the previous Friday.Assume that year ended on December 31,which is a Wednesday,and all employees will be paid salaries for five full days on the following Monday.The adjusting entry needed on December 31 is:

A) Debit Salaries Expense,$5,400; credit Salaries Payable,$5,400.
B) Debit Salaries Expense,$3,600; credit Salaries Payable,$3,600.
C) Debit Salaries Expense,$9,000; credit Salaries Payable,$9,000.
D) Debit Salaries Payable,$5,400; credit Salaries Expense,$5,400.
E) Debit Salaries Expense,$5,400; credit Cash,$5,400.

F) All of the above
G) A) and E)

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Question 152

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The 12-month period that ends when a company's sales activities are at their lowest level is called the:

A) Fiscal year.
B) Calendar year.
C) Natural business year.
D) Accounting period.
E) Interim period.

F) B) and D)
G) All of the above

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Question 153

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Closing entries are required:

A classified balance sheet organizes assets and liabilities into important subgroups that provide more information to decision makers.

A company's post-closing trial balance has total debits of $40,560 and total credits of $40,650.Accordingly,the company should review for errors in the closing process.

The accrual basis of accounting recognizes expenses when cash is paid.

On December 1,Casualty Insurance Company borrowed $50,000 at a 6.0% interest rate from One Mutual Bank.The note payable plus interest will not be paid until April 1 of the following year.The company's annual accounting period ends on December 31 and adjustments are only made at year-end.The adjusting entry needed on December 31 is:

On April 1,Otisco,Inc.paid Garcia Publishing Company $1,548 for 36-month subscriptions to several different magazines.Otisco debited the prepayment to a Prepaid Subscriptions account,and the subscriptions started immediately. -Assuming adjustments are only made at year-end,What is the adjusting entry that should be recorded by Garcia Publishing Company on December 31 of the first year?

Asset and liability balances are transferred from the adjusted trial balance to the balance sheet.

During the current year ended December 31,clients paid fees in advance for accounting services amounting to $15,000.These fees were recorded in an account called Unearned Accounting Fees.If $3,500 of these fees remains unearned on December 31 of this year,prepare the required December 31 adjusting entry to bring the accounts up to date.

The first five steps in the accounting cycle include analyzing transactions,journalizing,posting,preparing an unadjusted trial balance,and recording adjusting entries.

Fragmental Co.leased a portion of its store to another company for eight months beginning on October 1,at a monthly rate of $800.Fragmental collected the entire $6,400 cash on October 1 and recorded it as unearned revenue.Assuming adjusting entries are only made at year-end,the adjusting entry made by Fragmental Co.on December 31 would be:

Which of the following accounts is a permanent (real) account?

The balances in Labeille Accounting Services' office supplies account on February 1 and February 28 were $1,200 and $375,respectively.If the office supplies expense for the month is $1,900,what amount of office supplies was purchased during February?

What is the purpose of closing entries? Describe the closing process.

Explain the difference between temporary and permanent accounts.

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

When there is a net loss,the Income Summary account would have a credit balance.

The following information is available from the adjusted trial balance of the Harris Vacation Rental Agency.After closing entries are posted,what will be the balance in the Retained earnings account?

On July 1 of the current calendar year,Olive Co.paid $7,500 cash for management services to be performed over a two-year period beginning July 1.Olive follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment.The adjusting entry on December 31 of the current year for Olive would include: