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Exam 4: Adjustments,financial Statements,and Financial Results

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Question 91

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On December 31,the Human Bean Coffee Shop paid $12,000 for a full year of rent beginning on January 1.The rent payment was appropriately recorded in the Cash and Prepaid Rent accounts.If financial statements are prepared on January 31,the journal entry to record the adjustment would be:

A) Debit Rent Expense and credit Prepaid Rent for $1,000.
B) Debit Rent Expense and credit Prepaid Rent for $12,000.
C) Debit Prepaid Rent and credit Rent Expense for $12,000.
D) Debit Prepaid Rent and credit Rent Expense for $1,000.

E) A) and D)
F) B) and C)

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Question 92

Multiple Choice

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If adjustments to the financial statements were not made,what would be the effect on the financial results?

A) The financial statements would present an incomplete and misleading picture of company financial performance.
B) There would be little effect because any items not recognized in the reporting period would be recognized the next reporting period.
C) No effect would result because adjustments do not reflect cash paid or received.
D) There would be no effect because some adjustments increase net income and others decrease it, canceling each other out.

E) A) and D)
F) B) and C)

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Question 93

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A deferral adjustment may involve one asset and one expense account.

The Don't Tread on Me Tire Company had Retained Earnings at December 31,2015 of $200,000.During 2016,the company had revenues of $400,000 and expenses of $350,000,and the company declared and paid dividends of $11,000.Retained earnings on the balance sheet as of December 31,2016 will be:

Amortization is the expensing of:

The purpose of adjusting entries for income taxes is to record income taxes ______ the accounting period.

All of the following accounts will have zero balances on a post-closing trial balance except:

A closing entry may include a:

Which of the following statements about an adjusted trial balance is correct?

Accumulated Depreciation appears on the:

The following account balances are included in the adjusted trial balance of Delta Inc.as of April 30,2015.All of the accounts have normal balances. Required: Part a.Prepare an income statement. Part b.Prepare a statement of retained earnings

If certain assets are partially used up during the accounting period,then:

Match the term and its definition.There are more definitions than terms. Terms 1____ .Contra-Account 2____ .Carrying Value 3____ .Deferral Adjustment 4____ .Closing Journal Entry 5____ .Net Loss 6____ .Adjusted Trial Balance 7____ .Temporary Account 8____ .Accrual Adjustment 9____ .Income Before Income Taxes Definitions A.When revenue minus expenses is a negative number. B.Adds new values into the balance sheet and income statement accounts. C.Also known as balance sheet accounts. D.Entries made to update existing accounts and record new events. E.The level of profit prior to considering income tax. F.Lists the balances of all accounts to check that revenues equal expenses. G.The amount at which an asset or liability is reported in the financial statements. H.An account that is paired with another account and acts to reduce its book value. I.Lists the balances of all temporary and permanent accounts to provide a check on the equality of the debits and credits. J.A journal entry that transfers net income or loss to the Retained Earnings account. K.Converts some of an asset's or a liability's book value into an expense or a revenue. L.An account that must have a zero balance after Closing entries have been made. M.Lists the balances of all permanent accounts to check that debits equal credits.

Adjustments ensure that ____ balances are reported at amounts representing the economic benefits that remain at the end of the period and will be used-up in future periods.

What are the effects on the accounting equation from the adjustment for revenue earned during the accounting period that had previously been recorded as a liability?

One type of deferral adjustment reduces the balance in a(n) ______ account on the balance sheet and transfers that reduction into a(n) ______ account on the income statement.

What are the effects on the accounting equation from the adjustment for depreciation?

All of the transactions of Starfish Tattoo Parlor Inc.for the year have been journalized and posted.The following information has been gathered for the adjustment process as of December 31,2016: A) The Supplies account shows a balance of $900. A count of supplies revealed $400 on hand. B) The $1,200 premium relating to a one-year insurance policy was paid on December 1, 2016. C) The company's equipment, which was purchased last year, depreciates at a rate of $1,000 per year. D) On September 30, 2016, a customer paid $10,000 in advance for services; as of December 31, 2016, services in the amount of $3,000 had been performed for this customer. E) Employees are paid $5,000 on Fridays for the 5-day work week, which ends on that Friday. However, December 31, 2016 falls on a Thursday. F) The company has completed $500 of work for customers; the customers have not yet been billed and the related revenue has not been recorded. Required: Part a. Prepare the required adjusting entries required at December 31, 2016. Part b. For each of the adjusting items, indicate the amount and the direction of effects of the adjusting journal entry on the elements of the balance sheet and income statement. Complete the following table by entering the amount and the direction (+ or -) or "NE" if the adjustment has no effect on the related financial statement item.

The adjusting entry to record services earned but not yet billed requires:

Which of the following would decrease net income?