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Exam 4: Accrual Accounting and Adjusting Entries

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Question 21

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What are adjusting entries and what is their purpose?

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Adjusting entries are journal entries ma...

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Question 22

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Pine Corporation makes adjusting entries monthly. As of March 31, the general ledger shows Prepaid Rent to have a debit balance of $6,000. Rent expires at a rate of $1,200 per month. No entry for rent has been recorded in the month of March. What adjusting entry is necessary at March 31?

A) Prepaid Rent 500
Cash 500
B)
Rent Expense 1,200
Cash 1,200
C)

D)
Prepaid Rent 6,000
Rent Expense 6,000

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Question 23

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Which one of the following adjustments will increase assets?

Suppose that a business sells 6-month subscriptions to its monthly magazine. On January 1, the company receives a total of $600 for 10 subscriptions. To record this transaction, the company debits "Cash" for $600 and credits "Unearned Subscription Revenue" for $600. As of January 31, the company has provided one month of magazines and has earned one month of revenue. What adjusting entry is necessary at January 31?

FedZ is a local package delivery service. If FedZ uses accrual basis of accounting, when should it recognize revenue from its package delivery service?

Brooks Company sells merchandise to customers. Under the accrual basis of accounting, Brooks should normally recognize:

A company forgot to record four adjustments during 2012. Which one of the following omissions of adjustments will understate assets?

Failure to record dividends paid would result in which of the following?

Which of the following entries properly closes a temporary account?

The names of the four major classifications of adjusting entries are ____________________, ____________________, ____________________, and ____________________.

The ____________________ of accounting is a system in which revenues are recognized when payments are received and expenses are recognized when payments are made.

Saturn Co. rented out office space to a tenant on January 1 and received a total of $90,000 for the first nine months of rent. The amount was recorded as Rent Collected in Advance when received. Adjustments are recorded only at the end of every quarter. What effect does the adjustment at March 31 have on Saturn's net income for the quarter ending March 31?

Explain the differences between the cash and the accrual basis of accounting and how the adjusting process fits in.

Timberland Company received advance payments from customers during 2012 of $240,000. At December 31, 2012, $20,000 of the advance payments still had not been earned. After the adjustments are recorded and posted at December 31, 2012, what will the balances be in the Unearned Service Revenue and Service Revenue accounts?

Big Dog Company began operations on January 1, 2012. The accountant for Big Dog has recorded the closing entries in the general journal at the company's year-end, December 31, 2012. In addition, the closing entries have been created in the computerized general ledger and the computer has generated a year-end trial balance. Since the closing entries have already been posted, the income statement that the computer printed has the proper account names, but all accounts have zero balances. In addition, the statement of retained earnings shows net income and dividends equal to zero instead of the correct 2012 net income and dividends. As you examine the general journal, you find the closing entries below: In good form, prepare a statement of retained earnings for the year ended December 31, 2012. The beginning balance of retained earnings is zero.

Which of the following entries properly closes a temporary account?

Which of the following statements present financial information based on the cash basis of accounting?

A company forgot to record four adjustments during 2012. Which one of the following omissions of adjustments will understate income?

Which one of the following is an example of a deferred revenue?

Game Systems Corporation has grown significantly over the past year. The end-of-year supplies on hand totaled $200, and purchases totaled $3,000, and supplies on hand at the beginning of the year amounted to $180. How much will Game Systems report as supplies expense for the current year?