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Exam 4: Adjustments,Financial Statements,and the Quality of Earnings

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Question 1

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On November 1,2011,Bug Busters collected $6,000 in advance for three months of service to be provided beginning on that date.Bug credited unearned rent revenue for $6,000.Prepare the adjusting entry required on December 31,2011 (assuming that no adjusting entries have been made during the year).

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On November 1, 2011, Bug Busters collect...

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Question 2

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Which of the following accounts would most likely not require an adjusting entry in the future?

A) Unearned subscriptions revenue
B) Office supplies
C) Utilities payable
D) Prepaid rent

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Question 3

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Which of the following account balances would be closed at year-end?

A.Describe how the income statement is related to the statement of stockholders' equity. B.Describe how the statement of stockholders' equity is related to the balance sheet. C.Describe how the statement of cash flows is related to the balance sheet.

Which of the following journal entries was created as the result of a deferral?

On December 31,2011,Krug Company reported total liabilities of $110,000 prior to the following adjusting entries: Depreciation expense was $31,000; Accrued service revenues totaled $29,000; Accrued expenses totaled $12,000; Expired insurance which was prepaid totaled $9,000; Rent revenue earned was $7,000; the rent was prepaid by the tenant and credited to unearned rent revenue. How much are Krug's total liabilities after adjusting entries?

Earnings per share are calculated by dividing net income minus preferred dividends by the average number of shares of common stock outstanding.

Which of the following correctly describes the following journal entry? Depreciation expense $\quad$$\quad$ Accumulated depreciation

The net profit margin ratio is calculated by dividing net sales by net income.

Explain how adjusting entries provide for potential manipulation by managers.In addition,discuss how compensation arrangements may result in incentives for such manipulation to occur.

Which of the following journal entries was created as the result of an accrual?

Which of the following account balances would not be affected by closing journal entries?

Which of the following does not correctly describe the following journal entry? Rent expense $\quad$$\quad$ Prepaid rent

Which of the following statements regarding the balance sheet is false?

Which of the following accounts was created as the result of a deferral?

On December 31,2011,Krug Company reported stockholders' equity of $280,000 prior to the following adjusting entries: Depreciation expense was $31,000; Accrued service revenues totaled $29,000; Accrued expenses totaled $12,000; Expired insurance which was prepaid totaled $9,000; Rent revenue earned was $7,000; the rent was prepaid by the tenant and credited to unearned rent revenue. How much is Krug's stockholders' equity after adjusting entries?

Which one of the following accounts would not be closed at the end of the accounting year?

An accrued expense has been both incurred and paid for using cash.

Which of the following statements regarding earnings per share is not correct?

Which of the following is a false statement about the unadjusted trial balance?