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Exam 3: Adjusting Accounts and Preparing Financial Statements

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Question 51

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On April 1,a company paid the $1,350 premium on a three-year insurance policy with benefits beginning on that date.What will be the insurance expense on the annual income statement for the year ended December 31?

A) $1,350.00.
B) $450.00.
C) $1,012.50.
D) $337.50.
E) $37.50.

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

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Question 52

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An annual reporting period consisting of any twelve consecutive months is known as:

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

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

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Question 53

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If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees,the end-of-period adjusting entry to record the portion of those fees that has been earned is:

Interim statements report a company's business activities for a one-year period.

Using the selected information given below for Bliss Company,calculate return on assets,debt ratio,and profit margin.Comment on the results of operations and the financial position of the company for the year.

On December 1,Miller Company borrowed $300,000,at 8% annual interest,from the Nomo Bank.Miller has 60 days before the first payment is required.What is the adjusting entry that Miller would need to make on December 31,the calendar year-end?

A company entered into a 2-month contract for $50,000 on April 1.It earned $25,000 of the contract services in April and billed the customer.The company should recognize the revenue when it receives the customer's check.

The _______________ depreciation method allocates equal amounts of an asset's cost to depreciation during its useful life.

All of the following are true regarding prepaid expenses except:

Which of the following does not require an adjusting entry at year-end?

Prepare general journal entries on December 31 to record the following unrelated year-end adjustments. a.Estimated depreciation on office equipment for the year,$4,000. b.The Prepaid Insurance account has a $3,680 debit balance before adjustment.An examination of insurance policies shows $950 of insurance expired. c.The Prepaid Insurance account has a $2,400 debit balance before adjustment.An examination of insurance policies shows $600 of unexpired insurance. d.The company has three office employees who each earn $100 per day for a five-day workweek that ends on Friday.The employees were paid on Friday,December 26,and have worked full days on Monday,Tuesday,and Wednesday,December 29,30,and 31. e.On November 1,the company received 6 months' rent in advance from a tenant whose rent is $700 per month.The $4,200 was credited to the Unearned Rent account. f.The company collects rent monthly from its tenants.One tenant whose rent is $750 per month has not paid his rent for December.

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:

Before an adjusting entry is made to accrue employee salaries,Salaries Expense and Salaries Payable are both understated.

A company records the fees for legal services paid in advance by its clients in an account called Unearned Legal Fees.If the company fails to make the end-of-period adjusting entry to record the portion of these fees that has been earned,one effect will be:

Adjusting entries are designed primarily to correct accounting errors.

If accrued salaries were recorded on December 31 with a credit to Salaries Payable,the entry to record payment of these wages on the following January 5 would include:

Match the following types of adjustments (a though d)with the transactions (1 through 4). 1.Prepaid expense 2.Unearned revenue 3.Accrued expense 4.Accrued revenue

Describe the two alternate methods used to account for prepaid expenses.

Financial statements are typically prepared in the following order:

On October 1,Haslip Company rented warehouse space to a tenant for $2,500 per month.The tenant paid five months' rent in advance on that date.The payment was recorded to the Unearned Rent account.The company's annual accounting period ends on December 31.The adjusting entry needed on December 31 is: